oversight

Semiannual Report - October 01, 2014 - March 31, 2015

Published by the Department of Education, Office of Inspector General on 2015-03-31.

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

        U.S. Department of Education
        Office of Inspector General

Semiannual Report to
Congress, No. 70
October 1, 2014–March 31, 2015
Office of Inspector General
Kathleen S. Tighe
Inspector General

May 2015

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, Semiannual Report to
Congress, No. 70.




Please Note:
The Inspector General’s Semiannual Report to Congress, No. 70 is available on the ED OIG
Web site at http://www2.ed.gov/about/offices/list/oig/sarpages.html.
            Message to Congress
On behalf of the U.S. Department of Education (Department) Office of Inspector General
(OIG), I present this Semiannual Report on the activities and accomplishments of this
office from October 1, 2014, through March 31, 2015. The audits, investigations, and
related work highlighted in the report are products of our continuing commitment to
promoting accountability, efficiency, and effectiveness through our oversight of the
Department’s programs and operations.

Over the last 6 months, we completed 35 investigations involving fraud or corruption
related to the Department’s programs and operations, securing more than $54 million in
settlements, fines, restitutions, recoveries, forfeitures, and savings. In addition, as a
result of our investigative work, criminal actions were taken against a number of people,
including school officials and service providers who cheated the students they were in
positions to serve. We also issued 11 audit-related reports that contained
recommendations to improve program operations, plus one report that highlighted good
controls relating to the Pell grant eligibility limit. The following are some examples of the
results of our audits and investigations.

     Our audit of actions the Department has taken to prevent borrowers from
      defaulting on their student loans found that the Department did not have a
      comprehensive plan or strategy to prevent student loan defaults and, as a result,
      may not be in a position to make strategic, informed decisions about the
      effectiveness of default prevention initiatives and activities now or in the future.

     Our audit of the office of Federal Student Aid’s (FSA) oversight of schools’
      compliance with the incentive compensation ban (which prohibits schools
      participating in the Federal student aid programs from providing any bonus or
      incentive payment to any person or entity for their success in securing school
      enrollments or awarding of Federal student aid) found that FSA’s policies and
      guidance were outdated and that FSA inconsistently adhered to those policies and
      guidelines, did not properly resolve incentive compensation ban findings, and
      singularly relied on imposing fines on schools found to have violated the incentive
      compensation ban.

     Criminal and civil actions, including prison sentences for three of its former
      employees, were taken against the now-defunct FastTrain College, a chain of for-
      profit schools in Florida, as well as the owner of the school and other officials for
      participating in a $6.5 million student aid fraud scam.

     The president of American Commercial College, Inc., was sentenced to 2 years in
      prison and was ordered to pay more than $977,000 in restitution and fines for
      knowingly violating the 90/10 rule (which provides that no more than 90 percent of
      a for-profit school’s revenue may come from Title IV Federal student aid). The
      school itself was also sentenced to 5 years of probation and was ordered to pay
      more than $2 million in restitution and fines.

     The cofounders of the now-defunct Carnegie Career College, a nonprofit school
      that operated in Ohio, are heading to prison for running a $2.3 million student aid
      fraud scam. The married couple recruited ineligible students to the school and
      created fake high school diplomas for those students that they used to apply for
      and receive Federal student aid.

     Our audit of the Department’s implementation and oversight of approved
      Elementary and Secondary Education Act flexibility requests found that the
      Department established and implemented an extensive and effective process for
      assessing State educational agencies’ (SEA) compliance with approved flexibility
      requests based on the information the SEAs submitted during monitoring. However,
      we noted that the Department could improve its oversight of SEAs by taking steps
      to ensure the accuracy of the data that SEAs submit.

     The owners of a tutoring company in Texas pled guilty to bilking the Dallas
      Independent School District and Fort Worth Independent School District out of
      more than $3 million for tutoring services that the company never provided. One of
      the owners was a former Dallas teacher who used her access to a school district’s
      database to obtain student names and identifying information that were used in
      the scam.

     The former director of the Mary L. Dinkins Higher Learning Academy charter school
      in South Carolina was found guilty of embezzling more than $1 million in Federal
      funds, which she converted to her personal use.

     A former vice president and partial owner of Harris Transportation Corporation was
      sentenced to prison and ordered to forfeit more than $1.4 million for routinely
      overbilling and submitting inflated claims for services provided to two school
      districts in Pennsylvania.

     Our FY 2014 Federal Information Security Management Act review found that the
      Department had made progress in strengthening its information security program;
      however, many longstanding weaknesses remain and the Department’s information
      systems continue to be vulnerable to serious security threats.

     For FY 2014, although the Department and FSA received a clean opinion on their
      financial statements, auditors identified a significant deficiency involving
      information technology security, which can increase the risk of unauthorized
      access to the Department’s systems, and an instance of noncompliance involving
      debts that were over 120 days past due.

In this report, you will find more information on these efforts, as well as summaries of
other reports issued and investigative actions taken over the last 6 months. I am very
proud of the results of this work, that criminals are behind bars, and that the Department
has before it recommendations for improvements from our reports. Our
recommendations, if implemented, will help put in place protections to prevent fraud and
abuse, protect student interests, improve oversight and monitoring, and recoup taxpayer
dollars.

I greatly appreciate the interest and support of this Congress and Secretary Duncan in our
efforts. I look forward to working with you in meeting the challenges and opportunities
that lie ahead.



Kathleen S. Tighe
Inspector General
                              Table of Contents




            1                               5                          17
Goal 1:     Improve the         Goal 2:     Strengthen       Goal 3: Protect the
Department’s ability to         the Department’s efforts     integrity of the
effectively and efficiently     to improve the delivery of   Department’s programs
implement its programs to       student financial            and operations.
promote educational             assistance.
excellence and
opportunity for all.




           27                              35                          49
Goal 4:     Contribute to       Annexes and                  Acronyms and
improvements in                 Required Tables              Abbreviations
Department business
operations.
Goal 1:
Improve the Department’s
ability to effectively and
efficiently implement its
programs to promote
educational excellence and
opportunity for all.
    Our first strategic goal reflects our mission to promote the efficiency and effectiveness of
    the U.S. Department of Education’s (Department) programs and operations. To achieve this
    goal, we conduct audits, investigations, and other activities. In our audit work, the Office
    of Inspector General (OIG) evaluates program results compared to program objectives,
    assesses internal controls, identifies systemic weaknesses, identifies financial recoveries,
    and makes recommendations to improve the Department’s programs and operations. In our
    investigative work, we focus on serious allegations of fraud and corruption and work with
    prosecutors to hold accountable those who steal, abuse, or misuse education funds.


                                                         Audits
                                      During this reporting period, work related to this goal included our audit of the
                                      Department’s implementation and oversight of approved Elementary and
                                      Secondary Education Act (ESEA) flexibility requests. In 2011, the Department
                                      established a formal process under which States could apply for flexibility from
                                      certain provisions of the ESEA on behalf of their State, local educational agency
                                      (LEA), or school. States submitted to the Department these flexibility requests,
                                      which peer reviewers evaluated and the Secretary ultimately approved or
                                      disapproved. Our audit assessed the Department’s monitoring of States’
                                      compliance with ESEA flexibility requests and how it assessed the sufficiency and
                                      accuracy of information received from the States to validate the implementation
                                      of approved requests. A summary of the audit follows.

                                      Department’s Implementation and Oversight of Approved
                                      Elementary and Secondary Education Act Flexibility
                                      Requests
                                      We found that the Department established and implemented an extensive and
                                      effective process for assessing State educational agencies’ (SEA) compliance with
                                      approved ESEA flexibility requests based on the information the SEAs submitted
                                      during monitoring. However, we noted that the Department could improve its
                                      oversight of SEAs by taking steps to ensure the accuracy of the data that SEAs
                                      submit. Specifically, the Department relied on SEAs to ensure the accuracy of the
                                      information but did not verify that the SEAs had policies and procedures to ensure
                                      accuracy. In addition, the Department did not require SEAs to provide assurance
                                      statements regarding data accuracy and did not have procedures requiring SEAs to
                                      disclose any limitations of the data or their data validation processes. Although
                                      the Department lacked procedures for verifying data accuracy, all nine SEAs we
                                      reviewed followed their respective State policies and procedures for ensuring the
                                      accuracy of the data submitted to the Department. However, because we did not
                                      review all SEAs, there is a risk that the remaining SEAs may not be taking steps to
                                      ensure data accuracy. Based on this finding, we made several recommendations,
                                      including that the Department include in its monitoring reviews a step to
                                      determine how SEAs with approved flexibility requests ensure the accuracy of the
                                      information they submit so the Department can determine the adequacy of their
                                      policies and procedures and whether the SEAs are following them. We also


2   Office of Inspector General Semiannual Report
 recommended that the Department require all SEAs to provide certifications that
 the information they submit is accurate, reliable, and complete and to disclose
 any limitations of the information, data, or validation process. In response to our
 audit, the Department proposed corrective actions that sufficiently addressed our
 findings and recommendations.



Recovery Act Investigations
 Over the last 6 months, OIG special agents continued to investigate allegations of
 fraud and corruption involving funds awarded under the Over the last 6 months,
 OIG special agents continued to investigate allegations of fraud and corruption
 involving funds awarded under the American Recovery and Reinvestment Act of
 2009 (Recovery Act). Since the enactment of the Recovery Act, OIG has initiated
 226 criminal investigations of various schemes involving improper uses of Recovery
 Act funds. To date, our Recovery Act-related investigations have resulted in more
 than 354 criminal convictions and more than $1.3 million in recoveries.

 Former Alabama Department of Education Director and
 Husband Sentenced (Alabama)
 In a previous Semiannual Report, we noted that a 2012 OIG audit of Alabama’s use
 of Recovery Act funds identified a possible conflict of interest involving the
 Alabama Department of Education’s director of Federal programs. We conducted
 a follow-up investigation that determined that the now-former director
 participated in a process that awarded more than $24 million in School
 Improvement Grants funds to three LEAs that listed her husband’s employer,
 Information Transport Solutions, Inc., as a contractor. The former director and
                   her husband were then indicted on ethics charges; charges of
                      misusing a State computer and e-mail account, documents,
                       and other materials; and charges of soliciting things of value
                        from another vendor for the purposes of influencing official
                        action. During this reporting period, they were each
                       sentenced in Montgomery County Circuit Court for their
                      roles in this scheme. Both were sentenced to serve 2 years in
                   prison and were ordered to pay more than $10,000 in fines and
 assessments. The sentences were later reduced to 6 months in prison follow by
 4 years of supervised probation.




                                            Office of Inspector General Semiannual Report   3
        Other Activities
        Participation on Committees, Work Groups, and Task Forces
        Inspector General Community
             Recovery Accountability and Transparency Board (Recovery Board). Inspector General Tighe is the Chair
                of the Recovery Board. The Recovery Board was created in 2009 to provide transparency of funds spent
                under the Recovery Act and to detect and prevent waste, fraud, and mismanagement of those funds.

              Data Act Interagency Advisory Committee. Inspector General Tighe is a member of this committee that
                provides strategic direction in support of the implementation of the Digital Accountability and
                Transparency Act of 2014.

        Federal and State Law Enforcement-Related Groups
            U.S. Department of Justice’s Financial Fraud Enforcement Task Force. The Department and the OIG are
                charter members of this task force, established by Executive Order in November 2009. The OIG also
                participated in the following working group.




4   Office of Inspector General Semiannual Report
                     Goal 2:
 Strengthen the Department’s
efforts to improve the delivery
of student financial assistance.
    This goal addresses an area that has long been a major focus of our audit and investigative
    work—the Federal student financial aid programs. These programs are inherently risky
    because of their complexity, the amount of funds involved, the number of program
    participants, and the characteristics of student populations. Our efforts in this area seek
    not only to protect Federal student aid funds from waste, fraud, and abuse, but also to
    protect the interests of the next generation of our nation’s leaders—America’s students.


                                                          Audits
                                       The Department disburses about $140 billion in student aid annually and manages
                                       an outstanding loan portfolio of $1 trillion. This makes it one of the largest
                                       financial institutions in the country. As such, effective oversight and monitoring of
                                       its programs, operations, and program participants are critical. Within the
                                       Department, the Office of Postsecondary Education (OPE) and the Federal Student
                                       Aid (FSA) office are responsible for administering and overseeing the student aid
                                       programs. OPE develops Federal postsecondary education policies, oversees the
                                       accrediting agency recognition process, and provides guidance to schools. FSA
                                       disburses student aid, authorizes schools to participate in the student aid
                                       programs, works with other participants to deliver services that help students and
                                       families finance education beyond high school, and enforces compliance with
                                       program requirements. During this reporting period, OIG work identified actions
                                       FSA and OPE should take to better protect the interest of students. Summaries of
                                       these reports follow.

                                       Department’s Administration of Student Loan Debt and
                                       Repayment
                                       With borrower defaults at the time of our audit at their highest rate since 1995,
                                       we sought to determine what actions the Department had taken to prevent
                                       borrowers from defaulting on their student loans. We found that the Department
                                       did not have a comprehensive plan or strategy to prevent student loan default,
                                       and thus could not ensure various Department offices’ efforts were coordinated
                                       and consistent. We also found that the roles and responsibilities of the offices and
                                       personnel tasked with preventing defaults or managing key default-related
                                       activities and performance measures to assess the effectiveness of the various
                                       default prevention activities were not well-defined. Further, we found that FSA’s
                                       Portfolio Performance Management Services group—the group responsible for
                                       analyzing the Federal student loan portfolio—had access to extensive loan and
                                       borrower information but had not used the information to identify trends or make
                                       recommendations for improvements or enhancements to the Department’s
                                       current default prevention activities. As a result of the lack of a comprehensive
                                       plan or strategy and well-defined roles, Department management may not be in a
                                       position to make strategic, informed decisions about the effectiveness of default
                                       prevention initiatives and activities now or in the future. The Department may
                                       also have missed opportunities to identify and rank risks, streamline activities
                                       between the Department offices engaged in default prevention activities, use


6    Office of Inspector General Semiannual Report
data to manage and innovate, respond to changes, and provide greater
transparency. We also found that the servicing contracts that FSA executed with
the Title IV Additional Servicers (TIVAS) in June 2009 did not explicitly establish
minimum required default prevention activities that TIVAS must perform for
borrowers with delinquent Department-held loans. As a result, one of the two
TIVAS included in our review did not perform the same amount of telephone
outreach for all delinquent borrowers. In addition, FSA did not monitor calls
between borrowers and a subcontractor used by one of the TIVAS, even though
the subcontractor placed the majority of telephone calls to delinquent
Department-held loan borrowers. As a result, FSA could not ensure the technical
accuracy of the information provided to a large portion of the servicer’s
delinquent borrowers or ensure that the customer service provided by the
subcontractor was appropriate or adequate.

Based on our findings, we made a number of recommendations, including that FSA
and OPE develop a comprehensive default prevention plan that describes the
Department’s default prevention strategy, defines the roles and responsibilities of
pertinent Department offices and personnel, and establishes performance
measures that can be used to assess the effectiveness of the default prevention
initiatives and activities identified in the plan. We also recommended that FSA
direct the Portfolio Performance Management Services group to immediately use
existing student loan information to identify trends and issues in the Federal
student loan portfolio and share its observations with Department executives,
confirm that all TIVAS are conducting required minimum telephone outreach
activities with delinquent borrowers in accordance with contract requirements,
develop and implement a process to monitor the default prevention activities of
TIVAS subcontractors, and determine whether borrowers were harmed during the
period when FSA did not require TIVAS to perform minimum default prevention
activities on delinquent borrower-held loans. The Department concurred with all
of our recommendations.

Oversight of School’s Compliance With the Incentive
Compensation Ban
We found that FSA did not revise its enforcement procedures and guidance to
ensure that they facilitated and did not hinder enforcement actions after the
Department eliminated the incentive compensation safe harbors in 2010 and did
not develop procedures and guidance instructing employees on how they should
determine the appropriate enforcement action for incentive compensation
violations. We also found that an internal memo from the then Deputy Secretary
of Education issued to FSA in 2002 and the guidance and procedures FSA
developed and implemented in response discouraged FSA employees from using
all allowable enforcement actions at FSA’s disposal. As a result, except for one
action based in part on incentive compensation, fines were the only enforcement
action that FSA used to punish violators of the incentive compensation ban.
Without strong procedures and guidance, FSA cannot ensure appropriate and
consistent enforcement actions against schools that violate the incentive
compensation ban, and fines will likely continue to be the predominant
enforcement action that FSA uses to punish violators of the incentive
compensation ban.


                                           Office of Inspector General Semiannual Report   7
                                        We also concluded that FSA followed its established methods for tracking
                                        activities related to incentive compensation and adapted its methods for
                                        detecting incentive compensation ban violations; however, our review of 26 FSA
                                        program review files found that 23 contained insufficient evidence to show that
                                        institutional review specialists completed all the incentive compensation testing
                                        procedures that FSA’s program review manual required. When we discussed
                                        incentive compensation testing procedures with the institutional review
                                        specialists who conducted 23 of the 26 program reviews, the institutional review
                                        specialists responsible for 13 of them confirmed that they did not always
                                        complete all of the incentive compensation testing procedures included in
                                        FSA’s program review manual. When institutional review specialists do not
                                        complete all the required incentive compensation testing procedures, FSA cannot
                                        make an informed decision about a school’s compliance with the incentive
                                        compensation regulations and is less likely to detect incentive compensation
                                        violations.

                                        Finally, we found that FSA did not properly resolve incentive compensation ban
                                        findings. Institutional review specialists and audit resolution specialists did not
                                        consult with FSA’s Administrative Actions and Appeals Service Group regarding
                                        final actions to resolve the one program review and four independent public
                                        accountant audits that identified violations of the incentive compensation ban
                                        from July 1, 2011, through September 17, 2013. Additionally, audit resolution
                                        specialists did not determine the merits of each violation by using a preliminary
                                        audit determination letter for findings in the four independent public accountant
                                        audit reports. When institutional review specialists and audit resolution specialists
                                        do not follow procedures, FSA cannot appropriately (1) determine the extent of
                                        each incentive compensation violation, (2) ensure that adequate corrective
                                        actions were taken, or (3) ensure that it took enforcement action sufficient to
                                        mitigate the risk of future incentive compensation violations. Although FSA did
                                        not explicitly agree or disagree with our findings, it proposed corrective actions
                                        that, if implemented, should be responsive to all nine of our recommendations.

                                        Controls Over the Pell Grant Lifetime Eligibility Limit
                                        Our audit to determine whether FSA had controls in place to ensure that students
                                        who had met or exceeded the Pell grant lifetime eligibility limit did not receive
                                        additional Pell grants found that FSA had those controls in place. We found no
                                        errors when testing the accuracy of the Lifetime Eligibility Used calculation 1 for a
                                        random sample of Pell grant awards. Further, we tested controls for a judgmental
                                        sample containing different scenarios for awards having Lifetime Eligibility Used
                                        calculated at or above 600 percent maximum allowed and found no significant
                                        issues. As such, the audit report did not include any recommendations for
                                        corrective actions.




1
 Under the Pell grant lifetime eligibility limit, a full-time student in a semester program could maintain Pell grant eligibility for 6 award
years, which is the equivalent of 12 semesters. A full-time student could receive 100 percent of the scheduled award in each of the 6 award
years, resulting in a Pell Grant Lifetime Eligibility Used of 600 percent before becoming ineligible for additional Pell grant disbursements.

8   Office of Inspector General Semiannual Report
Investigations of Schools and School Officials
          Identifying and investigating fraud in the Federal student financial assistance
          programs has always been a top OIG priority. The results of our efforts have led to
          prison sentences for unscrupulous school officials and others who stole or
          criminally misused Title IV funds, significant civil fraud actions against entities
          participating in the Title IV programs, and hundreds of millions of dollars returned
          to the Federal Government in fines, restitutions, and civil settlements.

          More Actions Taken in American Commercial College, Inc.,
          Fraud Scam (Texas)
          Previously, we reported that American Commercial Colleges, Inc., agreed to pay
          $2.5 million to settle claims that it violated the False Claims Act by falsely
          reporting that it complied with the 90/10 rule–a statutory requirement that for-
          profit schools obtain no more than 90 percent of their annual revenue from the
          Federal student aid programs. We also reported that the school, its president, and
          five senior executives had pled guilty and that four of those five executives had
          been sentenced to charges related to the scheme. During this reporting period,
          American Commercial College was sentenced to 5 years of probation and was
          ordered to pay nearly $2 million in restitution and fines, while the school
          president was sentenced to serve 24 months in prison and 1 year of supervised
          release and to pay more than $977,000 in restitution and fines.

          In addition, the former director of American Commercial Colleges’ Lubbock
          Campus pled guilty to making false statements and aiding and abetting related to
          misleading an investigation. During the course of the criminal investigation of
          American Commercial Colleges, the former director created and provided an
          electronic mail message containing false statements to OIG criminal investigators
          in an attempt to mislead the investigation.

          Criminal and Civil Actions Taken Against FastTrain
          (Florida)
          The owner and three admissions representatives of FastTrain College, a now-
          defunct for-profit school that operated seven campuses in Florida, were arrested,
          and three other employees were sentenced for their roles in a student aid fraud
          scam. From 2008 through May 2012, at the direction of the owner, school
          employees recruited students who had not earned a valid high school diploma or
          certificate of high school equivalency (GED), obtained fake high school diplomas
          for them, and falsified their student aid applications and related information to
          make it appear that the students were eligible to attend the school and receive
          Federal student aid when in fact they were not. Further, the school used exotic
          dancers as admissions officers in an effort to lure young male students to the
          school. As a result of their fraudulent recruiting practices, more than 1,300 Free
          Applications for Federal Student Aid (FAFSA) containing falsified information were
          submitted to the Department, which yielded some $6.5 million in Federal student
          aid that the owner allegedly used to fund a lavish lifestyle. In December, the
          U.S. Department of Justice and the Florida Attorney General’s Office filed a


                                                     Office of Inspector General Semiannual Report   9
                                      multimillion dollar civil complaint against FastTrain on grounds that it violated
                                      the False Claims Act. The three employees received sentences ranging from
                                      6 months to 18 months in prison and 2 years of supervised release, and they were
                                      ordered to pay restitution ranging from $142,107 to $252,000.

                                      Owners of Carnegie Career College Sentenced (Ohio)
                                      We previously reported that the two cofounders and an employee of Carnegie
                                      Career College, a purportedly not-for-profit school, were indicted on charges
                                      related to a multimillion dollar Federal student aid scam. During this reporting
                                      period, the cofounders, a husband and wife, were sentenced to 69 months and
                                      55 months in prison respectively, and they were ordered to pay more than
                                      $2.3 million in restitution. The cofounders and the employee, who pled guilty and
                                      awaits sentencing, recruited students who had not earned valid high school
                                      diplomas or GEDs, obtained fake high school diplomas for them, and fraudulently
                                                                                       applied for and received financial
                                                                                       aid on their behalf. As a result of
                                            The two cofounders of Carnegie             these actions, the school
                                            Career College were sentenced to           fraudulently received more than
                                            69 months and 55 months in
                                                                                       $2.3 million in Federal student aid
                                            prison, respectively, and they
                                            were ordered to pay more than              that the three used as their own
                                            $2.3 million in restitution.               personal slush fund for purchasing
                                                                                       jewelry, lingerie, cruises, and a
                                                                                       vacation to Las Vegas.

                                      Former Merrimack College Financial Aid Director
                                      Sentenced (Massachusetts)
                                      The former financial aid director for Merrimack College was sentenced to prison
                                      for fraud involving $4 million in student aid and Perkins loans—low-interest loans
                                      to help needy students finance the cost of postsecondary education. From 1998
                                      through 2007, the former director asked students to whom the school had offered
                                      grants to take out Perkins loans instead. The director promised the students that
                                      they would receive grants the next academic year that would enable them to pay
                                      off their Perkins loans. The director also disbursed Perkins loan funds to other
                                      students without the students’ knowledge or approval, and took actions to
                                      conceal the fraud from the students, their parents, and the school. The director
                                      was sentenced to 12 months and 1 day in prison and 3 years of supervised release.
                                      A restitution hearing is scheduled for later this year.

                                      Former Galiano Career Academy Information Technology
                                      Director Sentenced (Florida)
                                      In a previous Semiannual Report, we noted that the former president of Galiano
                                      Career Academy was sentenced to serve 4 years in prison and was ordered to pay
                                      more than $2.1 million in restitution for theft and fraud. He admitted that he
                                      knowingly used a diploma mill—owned and operated by his wife—to fraudulently
                                      qualify students for Federal student aid. He also admitted that he secretly made
                                      audio and video recordings of Department staff as they conducted an on-site
                                      review at his school and that he also tampered with student records during the


10   Office of Inspector General Semiannual Report
  review. During this reporting period, the school’s former information technology
  director was sentenced to 2 years of probation for aiding the former owner in this
  criminal activity.

  Former Galen College Contract Bookkeeper Pled Guilty to
  Theft (California)
  A former contract bookkeeper at the now-defunct Galen College pled guilty to
  stealing more than $85,000 from the school. The former bookkeeper created a
  sham business, then created and submitted phony invoices to the school for
  supplies that the school never purchased or received. As a result of the fraud, the
  school paid more than $85,000 to the woman’s sham company.

  Actions Taken in $100,000 Fraud Scheme at Lone Star
  College (Texas)
  A former Lone Star College employee and 3 of her conspirators were sentenced,
  while another 10 people await further criminal actions, for their roles in a student
  aid fraud scam at the school. The former employee accessed the school’s
  computer system, obtained student personal identifying information and student
  loan data, and used that information to divert the student financial aid refund
  checks to bank accounts under her and her conspirators’ control. As a result of
  these criminal actions, more than $100,000 in Federal student aid was stolen from
  unwitting Lone Star College students. The former school employee was sentenced
  to serve 5 years in prison and was ordered to pay $9,500 in restitution; one of the
  conspirators was sentenced to serve 2 years in prison; a second was sentenced to
  10 years of community supervision (probation) and was ordered to pay more than
  $7,000 in restitution; and a third conspirator was sentenced to 6 years of
  community supervision and was ordered to pay $18,000 in restitution.


Investigations of Fraud Rings
  Below are summaries of actions taken over the last 6 months against people who
  participated in Federal student aid fraud rings. Fraud rings are large, loosely
  affiliated groups of criminals who seek to exploit distance education programs in
  order to fraudulently obtain Federal student aid. The cases below are just a
  sample of the large number of actions taken against fraud ring participants during
  this reporting period. As of March 31, 2015, OIG has opened 146 fraud ring
  investigations, secured more than 556 indictments of fraud ring participants, and
  recovered more than $23.3 million.

  In addition, we continued with a proactive investigative project to identify
  student aid fraud rings. The project uses an E-Fraud Query System risk model that
  we developed, as well as other investigative and analytical tools and data
  sources, to identify the scope of each fraud ring, estimate the total potential
  fraud, and establish grounds for initiating criminal investigations.




                                            Office of Inspector General Semiannual Report   11
                                      Actions Taken Against Three Members of a $2.7 Million
                                      Fraud Ring (Illinois)
                                      In our last Semiannual Report, we noted that six people were charged with
                                      participating in a fraud ring that sought to obtain more than $2.7 million in
                                      student aid, mortgages, bank, and small business loans. During this reporting
                                      period, three ring members were sentenced for their roles in the fraud. Between
                                      2010 and 2012, the ring submitted at least 40 fraudulent applications for
                                      admissions to and Federal student aid from Harper College, Elgin Community
                                      College, and Joliet Junior College. For some of the applications, the ring used
                                      stolen identities that it obtained through credit card and mortgage fraud
                                      schemes. The ring caused the financial aid checks to be sent to addresses they
                                      controlled, and then cashed the checks and used the proceeds for themselves and
                                      others. The ring members received prison sentences ranging from 1 year and
                                      1 day in prison to 57 months in prison, and 3 years of supervised release. Ring
                                      members were ordered to pay restitution ranging from $24,243 and $109,200.

                                      Action Taken Against Ringleader, Two Members of
                                      $1.8 Million Fraud Ring (California)
                                      We previously reported that members of a fraud ring were indicted on charges
                                      related to a $1.8 million Federal student aid fraud scheme. The ring recruited
                                      more people to act as “straw students” and helped the straw students prepare,
                                      sign, and transmit fraudulent FAFSAs, knowing that many of the straw students
                                      were not eligible to receive Federal student aid because they had not obtained
                                      high school diplomas or GEDs, and had no intention of attending school or using
                                      the funds for educational purposes. After receiving the student aid funds, the four
                                      shared the proceeds among themselves and sometimes the straw students. During
                                      this report period actions were taken against three of the four ring members. One
                                      ring member was sentenced to serve 37 months in prison and 36 months of
                                      supervised release and was ordered to pay more than $520,900 in restitution and
                                      fines. A second ring member was sentenced to serve 36 months of probation and
                                      was ordered to pay more than $9,300 in restitution. A third participant agreed to
                                      a pretrial diversion.

                                      Four Sentenced in $254,000 Fraud Ring That Used
                                      Identities of Prison Inmates to Scam Student Aid
                                      (Arizona)
                                      Four members of a fraud ring that used the identities of prison inmates to
                                      fraudulently apply for and receive Federal student aid have all been sentenced for
                                      their roles in the scheme. From 2010 through 2012, the ring submitted fraudulent
                                      admissions and student aid forms to Mesa Community College and Rio Salado
                                      College on behalf of 37 straw students, most of whom were inmates in Arizona
                                      prisons. Two of the three ring members also fraudulently obtained the personal
                                      identifying information of several inmates and used that information to apply for
                                      admission to the schools and for student aid. None of the straw students
                                      participated in or intended to participate in the college courses, and most were
                                      unaware that they were enrolled in school or obtaining Federal student aid.


12   Office of Inspector General Semiannual Report
Further, two of the ring members were serving sentences in prison at the time,
and obtained the personal identifying information of other prison inmates whose
identities were used in the fraud. As a result of their fraudulent actions, the ring
obtained more than $254,800 in Federal student aid to which they were not
entitled. Fraud ring members received sentences ranging from 5 years of probation
to 54 months in prison, followed by supervised release.

Actions Taken Against Members of a $200,000 Fraud Ring
(Puerto Rico)
We previously reported that nine people were indicted for participating in a fraud
ring that targeted online courses and Federal student aid at InterAmerican
University. The ring leader recruited people to act as straw students and
submitted false admissions and financial aid applications to the school on their
behalf; the straw students had no intention of attending classes. The ring leader
paid a portion of the student aid refund award to the straw student for the use of
his or her identity and kept the rest. As a result of these actions, the ring
fraudulently obtained more than $200,000 in Federal student aid. During this
reporting period, the ring leader pled guilty to his role in the scheme, another ring
member was sentenced to 6 months of probation and was ordered to pay $25,000
in restitution, and four others entered into pretrial diversions, agreeing to 5 to
6 months of probation and 100 hours of community service.

Two Sentenced in $147,000 Fraud Ring (Arizona)
Two people who targeted online courses at Maricopa Community Colleges were
sentenced for stealing more than $147,000 in Federal student aid. The two
recruited people to act as straw students, many of whom were ineligible to
receive Federal student aid as they did not possess a high school diploma or GED.
None of the students intended to attend classes or use the funds for educational
purposes. They submitted fraudulent admissions and student aid forms to the
school on behalf of the straw students and kept a portion of the student aid refund
checks. One ring member was sentenced to 5 years of probation and was ordered
to pay more than $147,000 in restitution; his partner was sentenced to serve
5 years in prison.

Alleged Leader of $130,000 Fraud Ring Indicted
(Michigan)
The alleged leader of a fraud ring that targeted online classes and Federal student
aid at the University of Phoenix, Ashford University, and Capella University was
arrested and indicted on charges of student aid fraud, wire fraud, and aggravated
identity theft. The ringleader allegedly recruited people to act as straw students,
completed admissions and student aid forms on their behalf, and received a
portion of the student aid refund once received.




                                           Office of Inspector General Semiannual Report   13
           Investigations of Other Student Aid Fraud Cases
                                      The following are summaries of the results of additional OIG investigations into
                                      abuse or misuse of Federal student aid.

                                      Financial Advisor Sentenced in $1.4 Million Fraud Scheme
                                      (New Hampshire)
                                      A financial advisor was sentenced to 42 months in prison and 3 years of supervised
                                      release and was ordered to pay $1.4 million for bilking clients whom he duped in a
                                      fraud scheme. From 2008 through 2011, the advisor fraudulently solicited more
                                      than $1 million in purported investments from the clients, all of whom were
                                      elderly widows. He failed to report the fraudulently obtained funds on his Federal
                                      income tax returns and failed to report his income accurately on student aid
                                      applications for his children’s attendance at Salve Regina University and Endicott
                                      College. As a result, his two children received Federal student aid to which they
                                      were not entitled.

                                      Great Falls Family Sentenced in $700,000 Fraud Scam
                                      (Montana)
                                      We previously reported that a student seeking a criminal justice degree from the
                                      University of Great Falls and his parents pled guilty to student aid fraud, as they
                                      intentionally failed to disclose more than $700,000 in household income on FAFSAs
                                      submitted from 2009 through 2012. This allowed them to receive Stafford and
                                      PLUS loans and Pell grants that they otherwise would have been ineligible to
                                      receive. Much of the $700,000 was Recovery Act funds that the parents and other
                                      family members stole from the Chippewa Cree Tribe. The tribe received a
                                      $300,000 Recovery Act award to fund the construction of a freshwater pipeline for
                                      the Rocky Boy’s Indian Reservation. The family members and others diverted the
                                      funds to a shell company they had created and then used the funds for personal
                                      enrichment. During this reporting period, the three family members were
                                      sentenced for their criminal actions. Both the husband and wife were sentenced to
                                      serve 24 months in prison; the husband was also ordered to pay more than
                                      $281,300 in restitution, while his wife was ordered to pay more than $375,000 in
                                      restitution. Their son was sentenced to 6 months in Federal custody and 5 years of
                                      probation and was ordered to pay more than $82,000 in restitution.

                                      Department of Transportation Employee and Daughter
                                      Sentenced (North Carolina)
                                      A Department of Transportation employee was sentenced to 8 months of home
                                      confinement and 5 years of supervised release and was ordered to pay more than
                                      $151,200 in restitution for her role in a student aid fraud scheme. From 2008
                                      through 2013, the woman submitted fraudulent FAFSAs and other student aid
                                      forms for her two daughters, claiming that she was unemployed when in fact she
                                      was receiving more than $100,000 per year in salary. As a result of the fraud, her
                                      daughters received more than $113,000 in student aid to which they were not



14   Office of Inspector General Semiannual Report
entitled. One of her daughters was sentenced to 8 months of home confinement
and 5 years of supervised release and was ordered to pay more than $76,600 in
restitution for her role in the scam.

Woman Sentenced in $90,000 Fraud Scheme (Ohio)
A woman who used her own identity and those of five other people to fraudulently
obtain more than $90,000 in Federal student aid was sentenced to 27 months in
prison and 3 years of supervised release and was ordered to pay more than
$90,000 in restitution. The woman applied for and received Federal student aid
from multiple institutions, including Lakeland Community College, Columbus State
Community College, Owens State Community College, and Franklin University, in
her own name and in the names of other people who had no intention of attending
the schools.

Woman Sentenced in $52,900 Fraud Scheme (Florida)
A woman was sentenced to serve 21 months in prison and 2 years of supervised
release and was ordered to pay more than $52,900 in restitution for fraud. From
2009 through 2014, the woman applied for admission and student aid for online
courses at the University of Phoenix, Grand Canyon University, and Ohio Christian
University without any intention of attending classes.

Husband Sentenced for Student Aid Fraud, Wife a Fugitive
(Massachusetts)
In our last Semiannual Report, we noted that a couple were indicted in
Massachusetts and New York for providing false information on their student aid
applications for their children—one attending Harvard College and the other
attending the University of Rochester—to receive Federal student aid to which
they were not entitled. The parents underreported their wages and income,
sources of income, and adjusted gross income on FAFSAs submitted from 2010
through 2013 to obtain more than $160,000 in student aid for their Harvard
student and about $46,600 for their Rochester student. During this reporting
period, the husband was sentenced to serve 4 months in prison and 36 months of
supervised release and was ordered to pay more than $34,700 in restitution for his
role in the scheme. His wife is currently a fugitive.

Doctor Pled Guilty to Tax Fraud, Student Aid Fraud, and
Social Security Fraud (Pennsylvania)
A former medical director of the Lehigh County Prison pled guilty to a 17-count
indictment stemming from his schemes to defraud the Department, the Internal
Revenue Service, and the U.S. Department of Health and Human Services out of
hundreds of thousands of dollars and get financial aid grants for four of his
children. Since 2001, the doctor engaged in a series of illegal schemes designed to
help him evade paying back hundreds of thousands of dollars in outstanding
medical school loans and more than $200,000 in personal income taxes. He also
lied on FAFSAs for his children, which enabled them to receive more than $36,000
in Pell grants.



                                          Office of Inspector General Semiannual Report   15
        Other Activities
        Participation on Committees, Work Groups, and Task Forces
             Department of Education Policy Committees. OIG staff participate in an advisory capacity on these
                  committees, which were established to discuss policy issues related to negotiated rulemaking for
                  student loan regulations and for teacher preparation regulations.

        Review of Legislation, Regulations, Directives, and Memoranda
             America's College Promise Legislation. The OIG made technical and clarifying suggestions.

                 FSA Compliance with Federal Laws and Regulations Regarding Site Visits, Monitoring. The OIG made
                  technical and clarifying suggestions.

                 Dear Colleague Letter on Title IV Requirements for Competency-Based Education Programs. The
                  OIG provided comments to improve the guidance on compliance with Title IV requirements.

                 Dear Colleague Letter on Confirming the Title IV Eligibility of Eligible Noncitizenships in Distance
                  Education. The OIG provided comments to improve the reliability of procedures to confirm student
                  eligibility.

                 Department’s Final Rule on Gainful Employment. The OIG nonconcurred with the Final Rule because
                  it excluded students’ indirect costs, such as room and board, from the debt calculation used to
                  determine whether gainful employment programs resulted in students earning sufficient income to
                  meet their debt obligations. A more detailed discussion of this issue is included in Table 6.




16   Office of Inspector General Semiannual Report
Goal 3:
Protect the integrity of the Department’s
programs and operations.
     Our third strategic goal focuses on our commitment to protect the integrity of the
     Department’s programs and operations. Through our audit work, we identify problems and
     propose solutions to help ensure that programs and operations are meeting the requirements
     established by law and that federally funded education services are reaching the intended
     recipients—America’s students. Through our criminal investigations, we help to protect
     public education funds for eligible students by identifying those who abuse or misuse
     Department funds and helping hold them accountable for their unlawful actions.


                                                         Audits
                                       OIG audits and other reviews assess the effectiveness of internal controls,
                                       evaluate the appropriateness of Federal funds usage, and identify weaknesses and
                                       deficiencies in Departmental programs and operations that could leave them
                                       vulnerable to waste, fraud, and abuse. The results of our work can assist the
                                       Department, as well as grantees and program participants, improve operations,
                                       strategic planning, and risk management. During this reporting period, we issued
                                       one report related to this goal: an audit of the payback provision of the Personnel
                                       Development to Improve Services and Results for Children with Disabilities
                                       Program (PDP). PDP is an $83.7 million program aimed at increasing the number
                                       of qualified personnel trained to work with children with disabilities. Students
                                       who receive PDP funding, known as PDP scholars, must work for a period of time
                                       through eligible employment providing indirect or direct services to children with
                                       disabilities, or they must pay back the assistance they received. This was the
                                       second in a series of audits we conducted on the effectiveness of payback
                                       programs. The first report in this series focused on the payback provisions of the
                                       Rehabilitation Long-Term Training Program, which we summarized in our last
                                       Semiannual Report to Congress.

                                       Payback Provisions of the Personnel Development to
                                       Improve Services and Results for Children With
                                       Disabilities Program
                                       Our audit found the PDP program results reported by the Department’s Office of
                                       Special Education Programs to be encouraging; however, data limitations and
                                       quality issues limited stakeholders’ ability to assess PDP effectiveness.
                                       Specifically, only slightly more than half of the PDP scholars in our review who
                                       had graduated or otherwise exited their respective program had either completed
                                       or were working toward completing their service obligation; the rest had not yet
                                       begun work or were still within the program’s 5-year grace period. As a result, it
                                       was too early in the process to adequately assess program effectiveness. In
                                       addition, although related Government Performance and Results Act measures
                                       provided some insight into program effectiveness, we identified certain
                                       limitations and quality issues with information on PDP scholars that the Office of
                                       Special Education Programs and its former contractor used in compiling some
                                       performance data, including issues related to the total number of scholars served
                                       and the reported service obligation data. Reasons for the data quality concerns
                                       were directly attributable to the overall design of the program, which required
                                       coordination between multiple parties and the use of multiple data collection

18    Office of Inspector General Semiannual Report
         systems, and the program’s reliance on self-reported data. The Department also
         had limited involvement in monitoring the program’s payback requirement,
         including not monitoring its contractor’s oversight of the payback requirement as
         diligently and effectively as it could have. We also identified problems with the
         methodology used to calculate results that limited stakeholders’ ability to draw
         reliable conclusions on program effectiveness. Additionally we noted that the
         Office of Special Education Programs did not always appropriately identify and
         refer for financial payment scholars who were not fulfilling their service
         obligation, which increases the susceptibility of the PDP to fraud, waste, and
         abuse. To address the weaknesses identified, we made 11 recommendations. The
         Department concurred with our recommendations and noted significant actions
         that it had taken or planned to take to address each of them.


Investigations of Public Corruption, Schools,
            and School Officials
         OIG investigations include criminal investigations involving bribery,
         embezzlement, and other criminal activity, often involving State and local
         education officials who have abused their positions of trust for personal gain.
         Examples of some of these investigations follow.

         Former El Paso School District Director Sentenced (Texas)
         The former director of the Priority Schools Division of the El Paso Independent
         School District was sentenced for her role in a cheating scandal. The former
         director conspired with a former district superintendent to manipulate mandated
         State and Federal annual reporting data to appear that the district complied with
         requirements of the No Child left Behind Act and met or exceeded its Adequate
         Yearly Progress standards. The director was sentenced to 5 years of probation and
         was ordered to pay a $5,000 fine. The former superintendent was sentenced to
         prison for his role in this scheme in 2012.

         Actions Taken Against Two More Beaumont Independent
         School District Officials (Texas)
         In our last Semiannual Report, we noted that the former finance director and the
         former comptroller of the Beaumont Independent School District were sentenced
         to prison for stealing more than $4 million from the district’s coffers. During this
         reporting period, actions were taken against two other district officials for
         activities unrelated to that crime. A former assistant superintendent was charged
         with theft and conspiracy for allegedly embezzling more than $750,000 from the
         school district, including stealing money from a high school booster club and
         steering contracts totaling $480,000 to a family member. The former official is
         also alleged to have conspired with a former high school principal to increase
         standardized test scores by providing teachers with test answer keys and by
         changing answers on student test booklets.




                                                   Office of Inspector General Semiannual Report   19
                                      Former Executive of a 21st Community Learning Center
                                      Sentenced (Louisiana)
                                      We previously reported that the former executive director and accountant for
                                      CDC 58:12, a participant in the 21st Century Community Learning Center program,
                                      pled guilty to theft of government funds and wire fraud. From 2011 through 2013,
                                      the former executive improperly withdrew about $87,000 from the CDC’s bank
                                      accounts to cover gambling debts and other personal expenses—funds that should
                                      have been used for services for residents of a public housing development,
                                      summer programs for children, and educational services. Additionally, while still
                                      employed at the center, the official submitted a fraudulent claim for
                                      unemployment insurance benefits to the Louisiana Workforce Commission, falsely
                                      representing that she was unemployed, resulting in the Louisiana Workforce
                                      Commission providing her with nearly $4,200. During this reporting period, the
                                      former executive director was sentenced to serve 15 months in prison and 3 years
                                      of supervised release and was ordered to pay more than $91,000 in restitution.

                                      Former Executive Director of the Midwestern
                                      Intermediate Unit IV Sentenced (Pennsylvania)
                                      We previously reported that the former executive director of the Midwestern
                                      Intermediate Unit IV educational service agency pled guilty to program fraud.
                                      During her tenure, the former executive director charged more than $71,000 on
                                      the agency’s credit card on questionable purposes, including restaurant meals,
                                      DVD rentals, and department store purchases that she misrepresented as business-
                                      related, when in fact they were not. During this reporting period, the former
                                      executive director was sentenced to serve 3 years of probation and 150 hours of
                                      community service, and she was ordered to pay more than $7,500 in restitution
                                      and fines.

                                      Former Westside Community Schools Comptroller Pled
                                      Guilty (Nebraska)
                                      The former comptroller and director of finance for Westside Community Schools,
                                      a public school district located in Omaha, pled guilty to embezzling some $50,000
                                      from the school district. From 2004 through 2010, the former comptroller had
                                      unlimited access to the school district’s accounts that he used to write checks to
                                      himself for cash, receive duplicate compensation for work, and purchase more
                                      than 200 gift cards and other items for personal use. The former comptroller
                                      created false account entries in the school’s accounting system to cover up his
                                      crime.

                                      Former Gila River Indian Reservation Principal Pled
                                      Guilty to Theft (Arizona)
                                      The former principal of the Casa Blanca Community School on the Gila River
                                      Indian Reservation in Bapchule, Arizona pled guilty to using the school’s bank card
                                      to make more than $22,300 for personal items to benefit his part-time career as a
                                      youth motivational speaker and musician, and more than $4,900 to a debt



20   Office of Inspector General Semiannual Report
   collection service to repay his student loan. In his guilty plea, the former principal
   agreed to a lifetime ban from employment with any institution that receives
   Department funds and permanent debarment from all procurement and non-
   procurement activities of the Federal Government.

   Former Fairfax County Middle School Principal and an
   Administrative Assistant Sentenced (Virginia)
   A former principal at Poe Middle School and an administrative assistant were
   sentenced for their roles in an embezzlement scheme involving 21st Century
   Community Learning Center funds. The two created timesheets in the names of
   their family and friends, who then received payments from Fairfax County Public
   School District for work they did not conduct. The former principal was sentenced
   to serve 12 months in prison and 1 year of probation and was ordered to pay
   $35,000 in restitution; the administrative assistant was sentenced to serve
   30 months in prison and 1 year of probation and was ordered to pay $8,000 in
   restitution. Both prison sentences were suspended.

   Former Executive Director of Oregon Respect, Inspire,
   Support, Educate Sentenced (Oregon)
   We previously reported that the former executive director for the now-defunct
   Oregon Respect, Inspire, Support, Educate, previously the Oregon Parent Training
   & Information Center, whose goal was to help people with disabilities and families
   of children with disabilities, was indicted for theft and aggravated identity theft.
   During this reporting period, the former official was convicted and sentenced to
   90 days in jail and 36 months of probation and was ordered to pay more than
   $20,000 in restitution. From 2006 through 2012, the former executive director
   stole money from organization and the National Indian Parent Information Center,
   which provided similar services under the Oregon Respect, Inspire, Support,
   Educate umbrella.



Investigations of Charter Schools
   OIG has conducted a significant amount of investigative work involving charter
   schools. From January 2005 through March 31, 2015, the OIG opened 68 charter
   school investigations. To date, these investigations have resulted in
   42 indictments and 34 convictions of charter school officials. The cases that have
   been fully settled have resulted in nearly $13.3 million in restitution, fines,
   forfeitures, and civil settlements.

   Former Charter School Executive Director Convicted
   (South Carolina)
   The former executive director of the Mary L. Dinkins Higher Learning Academy
   charter school was found guilty of embezzlement after a 10-day jury trial in
   Columbia, South Carolina. From 2007 through 2013, the former executive
   embezzled more than $1 million in Federal funds that were intended to be used
   for the school and its students. The jury also determined that the former


                                              Office of Inspector General Semiannual Report   21
                                      executive must forfeit more than $750,000 in annuities that she purchased while
                                      serving at the charter school as well as her share in a house that she owned.

                                      Former Charter School Principal Sentenced
                                      (Massachusetts)
                                      The former principal of the Robert M. Hughes Academy charter school was
                                      sentenced to 12 months of probation and was ordered to pay a $500 fine for her
                                      role in a cheating scam. The former principal instructed teachers to give clues
                                      and other tips to students taking the Massachusetts Comprehensive Assessment
                                      System exams, telling teachers that “this is where we earn our money,” and
                                      warning that the school could close or everyone could lose their jobs if the test
                                      scores were not satisfactory. She then falsely certified that the tests had been
                                      administered honorably.



                               Investigations of Supplemental
                               Educational Services Providers
                                       OIG audit work conducted over the last decade noted a lack of oversight and
                                       monitoring of Supplemental Educational Services (SES) providers by SEAs, which
                                       may leave programs vulnerable to waste, fraud, and abuse. Recent OIG
                                       investigative work has proven this point, uncovering cases involving fraud and
                                       corruption perpetrated by SES providers and school district officials.

                                       Owners of Tutoring Company That Scammed More Than
                                       $3 Million Pled Guilty (Texas)
                                       The owners of a tutoring company pled guilty to bilking Texas school districts out
                                       of more than $3 million. From 2011 through 2013, the two owners, one of whom
                                       was a former Dallas Independent School District teacher, contracted the Dallas
                                       Independent School District, the Fort Worth Independent School District, and
                                       other school districts in Texas to provide SES services on behalf of four tutoring
                                       companies. All of the companies were actually one business set up to mislead the
                                       Texas Education Agency in order to obtain more SES business than a single
                                       company could obtain from the school districts. The owners schemed to obtain as
                                       many student names and identifying information as possible, including by
                                       improperly accessing the Dallas Independent School District network. They and
                                       their employees would go door to door with gifts and prizes to induce the students
                                       to sign up for their tutoring services, regardless of the student’s intent to attend.
                                       They used the student information to enroll students into their program, induced
                                       students to sign attendance logs for tutoring sessions they did not receive, and
                                       submitted the fraudulent documentation and bills to the school districts. About
                                       $3.1 million, or 75 percent of the total amounts they billed, was for services that
                                       they never provided.

                                       More Actions Taken Against TestQuest (New York)
                                       We previously reported that TestQuest, an SES provider, agreed to pay
                                       $1.725 million to settle allegations that it engaged in fraud involving SES funds.

22   Office of Inspector General Semiannual Report
We also reported that a former TestQuest manager and New York City school
teacher who carried out the fraud pled guilty, agreed to a $2.3 million civil
judgment, and was sentenced to prison. Other teachers were sentenced to
probation, fined, and/or agreed to civil judgments in amounts ranging from
$12,000 to $21,300. During this reporting period, a judgment of more than
$37,000 was executed against another New York City teacher for her role in the
scheme. Similar to the actions of others who participated in the scheme, the
teacher submitted falsified documents to obtain additional funding for TestQuest.
The falsified documents claimed that she had provided after-school tutoring
services to more students than she had actually served.

Still More Actions Taken Against Academic Advantage
(New York)
                          Seven former employees of Academic Advantage
                          entered into consent judgments for engaging in a
                          scheme where their employer fraudulently obtained SES
                          funds for tutoring services it never provided. The
                          judgments, which ranged from $20,000 to $185,000, are
                          in addition to the more than $2.1 million Academic
                          Advantage and three of its former employees agreed to
                          pay for their roles in the fraud. From 2010 through
                          2012, Academic Advantage obtained Federal funds by
                          falsely reporting that it had provided SES tutoring to
                          certain students when no SES tutoring was
                          provided. Academic Advantage site managers and
program aides routinely forged student signatures on daily student attendance
sheets and instructed students to sign attendance sheets for tutoring classes that
they never attended or would not attend.

Woman Pled Guilty to Filing False SES Applications
(Florida)
A woman pled guilty to fraud, admitting that she created and filed fraudulent
documentation on behalf of three sham tutoring companies in an effort to obtain
SES funds from Florida schools. To receive SES funding, prospective SES service
providers must provide a copy of their tax identification number, bank
statements, and other supporting documents along with their applications. The
woman created and submitted fraudulent letters and statements from the
Internal Revenue Service, banking institutions, certified public accountants, and
other documentation to make it appear that the three companies were legitimate
entities eligible to participate in after-school tutoring programs funded by Federal
SES dollars.




                                          Office of Inspector General Semiannual Report   23
         Investigations of School Vendors and Contractors
                                      Our investigations into suspected fraudulent activity by Federal education
                                      grantees and others have led to the arrest and conviction of school vendors,
                                      contractors, and other people for theft or misuse of Federal funds.

                                      Former Vice President and Partial Owner of Bus Company
                                      Sentenced in $1.4 Million Fraud Case (Pennsylvania)
                                      The former vice president and partial owner of Harris Transportation Corporation
                                      was sentenced to 24 months in prison and 3 years of supervised release, and he
                                      and his company were ordered to pay more than $1.4 million in restitution for
                                      fraud. From 2008 through 2011, Harris Transportation Corporation, as a
                                      transportation provider for the Halifax Area
                                      School District and Upper Dauphin Area School
                                      district, routinely submitted false and grossly
                                      inflated mileage claims and other bills to the
                                      schools for payments totaling more than
                                      $3 million. The Pennsylvania Department of
                                      Education was also a victim in this scheme as it
                                      reimbursed the school districts for a large
                                      percentage of their transportation expenses.

                                      Vendor and Former District of Columbia Public School
                                      Employee Sentenced in $460,000 Fraud Case (District of
                                      Columbia)
                                      The owner of Joyce Thomas Children Services, a private transportation company,
                                      who was also a former compliance officer for District of Columbia Public Schools,
                                      was sentenced to 1 month in prison, 6 months of home detention, and 3 years of
                                      probation. He was also ordered to pay more than $463,600 in restitution for
                                      fraud. While still employed at District of Columbia Public Schools, he directed
                                      students and parents who were in need of interstate transportation to his
                                      company, from which he improperly earned more than $163,000. After being
                                      terminated from that position in 2010 as a part of an overall reduction in the
                                      workforce, he schemed to obtain nonpublic lists of students needing
                                      transportation services from his former colleagues in the district and later used
                                      the lists to create false invoices and supporting documentation for payments to
                                      his company in the names of the students. He created 60 false invoices and
                                      supporting documentation through this scheme, causing the District of Columbia
                                      Office of the State Superintendent of Education to pay his company $300,000 for
                                      transportation services that his company never provided.




24   Office of Inspector General Semiannual Report
Other Activities
Participation on Committees, Work Groups, and Task Forces
   Federal and State Law Enforcement-Related Groups
        U.S. Department of Justice’s Financial Fraud Enforcement Task Force—Consumer Protection
         Working Group. The OIG participates in this working group, composed of Federal law enforcement
         and regulatory agencies, which works to strengthen efforts to address consumer-related fraud.

        U.S. Department of Justice’s Financial Fraud Enforcement Task Force—Grant Fraud Committee.
         The OIG participates in this group composed of Federal law enforcement agencies seeking to
         enforce and prevent grant and procurement fraud.

        Northern Virginia Cyber Crime Working Group. The OIG participates in this working group of
         Federal, State, and local law enforcement agencies conducting cybercrime investigations in
         northern Virginia. The purpose is to share intelligence and collaborate on matters affecting multiple
         agencies.

   Federal and State Audit-Related Groups
        Association of Government Accountants Partnership for Management and Accountability. The OIG
         participates in this partnership that works to open lines of communication among Federal, State,
         and local governmental organizations with the goal of improving performance and accountability.

Review of Legislation, Regulations, Directives, and Memoranda
     Department’s Proposed Rulemaking for Workforce and Innovation and Opportunity Act. The OIG
         provided comments to ensure the rule includes strong internal controls over program administration
         and for the reliability of data used to assess program performance.

        2015 Institute of Education Sciences Statewide Longitudinal Data Systems Notice Inviting
         Applications. The OIG provided comments to help ensure that States’ responsibilities for protecting
         student privacy and confidentiality are included in the notice.

        Department’s Letter to Chief State School Officers on Supporting School Reform by Leveraging
         Federal Funds in a Schoolwide Program: Melding Title I and School Reform. The OIG suggested that
         the guidance section of the letter include a list of useful resources




                                                                          Office of Inspector General Semiannual Report   25
26   Office of Inspector General Semiannual Report
Goal 4:
Contribute to improvements in
Department business operations.
     Effective and efficient business operations are critical to ensure the Department effectively
     manages its programs and protects its assets. Our fourth strategic goal speaks to that effort.
     Our reviews in this area seek to help the Department accomplish its objectives by ensuring
     its compliance with applicable policies and regulations and the effective, efficient, and fair
     use of taxpayer dollars with which it has been entrusted.


                                              Audits and Reviews
                                       OIG audits and reviews completed over the last 6 months that contributed to this
                                       goal have focused on statutory audits and reviews in the following areas.

                                              Information Technology Security. The E-Government Act of 2002
                                               recognized the importance of information security to the economic and
                                               national security interests of the United States. Title III of the E-
                                               Government Act, the Federal Information Security Management Act of 2002
                                               (FISMA), as amended by the Federal Information Security Modernization Act
                                               of 2014, requires each Federal agency to develop, document, and
                                               implement an agency-wide program to provide information security for the
                                               information and information systems that support the operations and assets
                                               of the agency, including those provided or managed by another agency,
                                               contractor, or other source. It also requires inspectors general to perform
                                               independent evaluations of the effectiveness of information security
                                               control techniques and to provide assessments of agency compliance with
                                               FISMA.

                                              Financial Management. One of the purposes of the Chief Financial Officers
                                               Act of 1990 is to improve agency systems of accounting, financial
                                               management, and internal controls to ensure the reporting of reliable
                                               financial information and to deter fraud, waste, and abuse of Government
                                               resources. The Act requires an annual audit of agency financial statements,
                                               which is intended to help improve an agency’s financial management and
                                               controls over financial reporting.

                                              Compliance. The Government Charge Card Abuse Prevention Act of 2012
                                               requires inspectors general to conduct periodic risk assessment of their
                                               agency’s purchase card program to identify and analyze the risks of illegal,
                                               improper, and erroneous purchases and payments. Inspectors general must
                                               then use the results of those risk assessments to determine the scope,
                                               frequency, and number of periodic audits of purchase card transactions to
                                               perform in the future.

                                       Information Technology Security
                                       FISMA Review
                                       Our FY 2014 review found that the Department’s information technology security
                                       program generally complied with FISMA and related Office of Management and
                                       Budget information security standards and that the Department had made
                                       progress in strengthening its information security program; however, many
                                       longstanding weaknesses remain and the Department’s information systems

28    Office of Inspector General Semiannual Report
continue to be vulnerable to serious security threats. We found that the
Department did not fully comply with 6 of the 11 FISMA reporting metrics:
configuration management, identity and access management, incident response
and reporting, risk management, remote access management, and contingency
planning. We also found that the Department still had not addressed problems
identified in previous OIG audit reports, as our work showed repeat or modified
repeat findings for five reporting metrics identified in OIG reports issued from

                                FY 2011 through FY 2013. Without adequate
                                management, operational, and technical security
                                controls in place, the Department’s systems and
                                information are vulnerable to attacks that could
                                lead to loss of confidentiality and integrity
                                resulting from information modification or theft
                                and shut-down or reduced availability of
                                information systems. Our FY 2014 FISMA report
                                offered 13 new recommendations as well as
                                7 modified repeat recommendations to help the
                                Department establish and sustain an effective
                                information security program that complies with
                                FISMA, Office of Management and Budget,
                                Department of Homeland Security, and National
Institute of Science and Technology requirements. The Department concurred
with most of our recommendations.

Financial Management
Financial Statements Audits
For FY 2014, both the Department and FSA received an unmodified (clean) opinion
on their financial statements; however, the financial statement auditors
identified one significant deficiency in internal control over financial reporting
and one instance of reportable noncompliance. The significant deficiency involved
information technology controls over security management, personnel security,
access controls, and configuration management, which can increase the risk of
unauthorized access to the Department’s systems used to capture, process, and
report financial transactions and balances, affecting the reliability and security of
the data and information. The instance of noncompliance involved a provision of
the Debt Collection Improvement Act of 1996, as amended by the Digital
Accountability and Transparency Act of 2014, that requires Federal agencies to
notify the Secretary of the Treasury of debts that are over 120 days past due. The
auditors found that neither the Department nor FSA had processes in place to
comply with the 120-day requirement, and that existing loan servicing procedures
and internal processes did not notify the Secretary of the Treasury of past-due
debts once they become over 180 days past due. Based on the findings, the
auditors recommended that the Department and FSA take action to address the
information technology control deficiencies, and to review their loan servicing
procedures and internal processes to comply with statutory requirements. The
Department and FSA concurred with findings and recommendations in the reports.




                                          Office of Inspector General Semiannual Report   29
                                      Closing Package Financial Statements
                                      The auditors found that the Department’s FY 2014 Closing Package Financial
                                      Statements were presented in accordance with generally accepted accounting
                                      principles. The report noted the issues identified in the Department’s and FSA’s
                                      financial statements and the need for the Department and FSA to mitigate the
                                      persistent information technology control deficiencies and their noncompliance
                                      with the timing requirements of the Digital Accountability and Transparency Act
                                      of 2014.

                                      Department’s Detailed Accounting of FY 2014 Drug Control Funds
                                      and Related Performance
                                      In accordance with the Office of National Drug Control Policy Circular “Accounting
                                      of Drug Control Funding and Performance Summary,” we authenticated the
                                      Department’s accounting of FY 2014 drug control funds and performance
                                      measures for key drug control programs by expressing a conclusion about the
                                      reliability of each assertion made in the Department’s accounting report and
                                      performance report. Based on our review, nothing came to our attention that
                                      caused us to believe that management’s assertions contained in the Department’s
                                      detailed accounting report and performance summary report are not fairly stated
                                      in all material respects.

                                      Compliance
                                      Purchase Card Risk Assessment
                                      Our review determined that the purchase card program does not pose a high risk
                                      to the Department and an audit of the program was not necessary. We reviewed
                                      the Department’s purchase card policies and procedures, Office of Management
                                      and Budget guidance, corrective action the Department has taken in response to
                                      previous OIG purchase card audit findings, documentation from the Department’s
                                      purchase card monitoring efforts, and data on disciplinary action the Department
                                      has taken in response to purchase card misuse. Additionally, we used OIG data
                                      analytic resources to identify and assess high-risk categories of potentially
                                      inappropriate purchases. Although we found that the program does not pose a
                                      high risk to the Department, we offered two suggestions to help the Department
                                      further strength its purchase card
                                      program: (1) ensure the Department
                                      documents and implements internal
                                      controls to fully address applicable
                                      requirements and guidance; and
                                      (2) improve coordination between
                                      Department units when reporting
                                      disciplinary actions taken against
                                      purchase card abusers to the Office
                                      of Management and Budget.




30   Office of Inspector General Semiannual Report
            Investigations
 The following is a summary of an OIG investigation involving unauthorized access
 to and abuse of a student financial aid database.

 Former University of Connecticut Student Worker
 Sentenced (Connecticut)
 A former University of Connecticut student working in the school’s financial aid
 office was sentenced to 7 years in prison (suspended) and 3 years of probation for
 unlawfully accessing the school’s student database. The former student used an
 unauthorized password to log into the database and made changes to students’
 financial aid records, attempting to transfer more than $73,000 in Federal student
 aid to himself and his friends.



Non-Federal Audit Activities
 The Inspector General Act of 1978, as amended, requires that inspectors general
 take appropriate steps to ensure that any work performed by non-Federal auditors
 complies with Government Auditing Standards. To fulfill these requirements, we
 perform a number of activities, including conducting quality control reviews of
 non-Federal audits, providing technical assistance, and issuing audit guides to
 help independent public accountants performing audits of participants in the
 Department’s programs.

 Quality Control Reviews
 Through 2013, Office of Management and Budget Circular A-133 required entities
 such as State and local governments, universities, and nonprofit organizations
 that spend $500,000 or more in Federal funds in 1 year to obtain an audit,
 referred to as a “single audit.” The Office of Management and Budget’s new
 “Uniform Administrative Requirements, Cost Principles, and Audit Requirements
 for Federal Awards” (known as the “Super Circular”) has since increased the
 single audit threshold to $750,000. Additionally, for-profit institutions and their
 servicers that participate in the Federal student aid programs and for-profit
 lenders and their servicers that participate in specific Federal student aid
 programs are required to undergo annual audits performed by independent public
 accountants in accordance with audit guides that the OIG issues. These audits
 assure the Federal Government that recipients of Federal funds comply with laws,
 regulations, and other requirements that are material to Federal awards. To help
 assess the quality of the thousands of single audits performed each year, we
 conduct quality control reviews of a sample of audits. During this reporting
 period, we completed 25 quality control reviews of audits conducted by
 24 different independent public accountants or firms with multiple offices. We
 concluded that 6 (24 percent) were acceptable or acceptable with minor issues,
 9 (36 percent) were technically deficient and 10 (40 percent) were unacceptable.




                                          Office of Inspector General Semiannual Report   31
        Other Activities
        Participation on Committees, Work Groups, and Task Forces
        Department
                  Department of Education Senior Assessment Team. The OIG participates in an advisory capacity on this
                   team. The team provides oversight of the Department’s assessment of internal controls and related
                   reports and provides input to the Department’s Senior Management Council concerning the overall
                   assessment of the Department’s internal control structure, as required by the Federal Managers’
                   Financial Integrity Act of 1982 and Office of Management and Budget Circular A-123, “Management’s
                   Responsibility for Internal Control.”

                  Department of Education Investment Review Board and Planning and Investment Review Working
                   Group. The OIG participates in an advisory capacity in these groups that review technology
                   investments and the strategic direction of the information technology portfolio.

                  Department Human Capital Policy Working Group. The OIG participates in this group that meets
                   monthly to discuss issues, proposals, and plans related to human capital management.

        Inspector General Community
                  Council of the Inspectors General on Integrity and Efficiency (CIGIE). OIG staff play an active role in
                   CIGIE efforts. Inspector General Tighe is Chair of the Information Technology Committee. Inspector
                   General Tighe is also a member of CIGIE’s Audit Committee, and the Suspension and Debarment
                   Working Group, which is a subcommittee of the Investigations Committee.

                  OIG staff also serve as chair of the Council of Counsels to the Inspectors General and vice chair of the
                   CIGIE Data Analytics Working Group of the Information Technology Committee. OIG staff are also
                   members of CIGIE’s Assistant Inspector General for Investigations Subcommittee, the Cyber Security
                   Working Group, the Grant Reform Working Group, the OIG Human Resources Directors’ Roundtable,
                   and the New Media Working Group. OIG staff also participate in the following.

                               Financial Statement Audit Network. OIG staff have a leading role in this Government-wide
                                working group that identifies and resolves key issues concerning audits of agency financial
                                statements and provides a forum for coordination with the Government Accountability
                                Office and the Treasury on the annual audit of the Government’s financial statements.

                               CIGIE/Government Accountability Office Annual Financial Statement Audit Conference.
                                OIG staff work on the Planning Committee for the annual conference that covers current
                                issues related to financial statement audits and standards.

        Federal and State Audit-Related Groups and Entities
                   Intergovernmental Audit Forums. OIG staff chair and serve as officers of a number of
                    intergovernmental audit forums, which bring together Federal, State, and local government audit
                    executives who work to improve audit education and training and exchange information and ideas
                    regarding the full range of professional activities undertaken by government audit officials. During
                    this reporting period, OIG staff served as the Federal representative for the National Forum, served
                    as vice chair of the Southwestern Forum, and served as officers of the Southeastern Forum, the
                    Southwestern Forum, and the New York/New Jersey Forum.




32   Office of Inspector General Semiannual Report
Participation on Committees, Work Groups, and Task Forces (continued)
Federal and State Audit-Related Groups and Entities (continued)
          Interagency Working Group for Certification and Accreditation. The OIG participates in this group
           that exchanges information relating to Federal forensic science programs that share
           intergovernmental responsibilities to support the mission of the National Science and Technology
           Council’s Subcommittee on Forensic Science.

         Interagency Fraud and Risk Data Mining Group. The OIG participates in this group that shares best
          practices in data mining and evaluates data mining and risk modeling tools and techniques that
          detect patterns indicating possible fraud and emerging risks.

         AICPA Government Audit Quality Center’s Single Audit Roundtable. OIG staff participate in this
          group, which meets semiannually and consists of Federal, State, and local government auditors and
          accountants who perform single audits. The participants discuss recent or anticipated changes in
          single audit policy, such as the Compliance Supplement to Office of Management and Budget
          Circular A-133, new auditing standards, and issues of audit quality found in recent quality control
          reviews.

Review of Legislation, Regulations, Directives, and Memoranda
     Proposed Presidential Memorandum Regarding Modernizing Federal Leave Policies for Childbirth or
          Adoption. The OIG made technical suggestions.

         Department’s Records Schedules for Email Retention and Disposition. The OIG provided comments
          relating to the Inspector General’s records and added a provision that records must be retained if
          they relate to an OIG investigation, audit, or other review.

         Department Handbook, Interagency Agreements. The OIG made technical suggestions.

         Department Directive, The Collection, Use, and Protection of Personally Identifiable Information
          and of Records Maintained in Privacy Act Systems of Records. The OIG made technical suggestions.

The OIG provided comments to the CIGIE for inclusion in its responses to Congress and the Office of
Management and Budget on the following matters:

         Federal Information Technology Acquisition Act of 2014. The Inspector General, in her capacity as
          chair of the Information Technology committee of CIGIE, wrote to the Office of Management and
          Budget regarding the Act’s Chief Information Officer authority enhancements' impact on IG
          independence.

         Proposal for Oversight of Certain Entities Without An Office of Inspector General. The OIG made
          technical and clarifying suggestions.

         Appendix II, Implementation of the Government Paperwork Elimination Act and Appendix III,
          Security of Federal Information Resources, to Office of Management and Budget Circular No. A-
          130, Management of Federal Information Resources. Coordinating with other OIGs, the OIG
          provided technical and clarifying suggestions regarding the appendices.

         S. 579, the Inspector General Empowerment Act of 2015 (114th U.S. Congress). The OIG made
          technical and clarifying suggestions.

         S. 2927 (113th U.S. Congress), Legislation to Strengthen Inspector General Audits and
          Investigations by Streamlining Computer Matching Agreements. The OIG made technical and
          clarifying suggestions.


                                                                           Office of Inspector General Semiannual Report   33
34   Office of Inspector General Semiannual Report
   Annexes and
Required Tables
           Annex A. Contract-Related Audit Products With
                        Significant Findings
                                      We are providing the following in accordance with Section 845 of the National
                                      Defense Authorization Act for Fiscal Year (Public Law No. 110-181), which
                                      requires Inspectors General to include information on final contract-related audit
                                      reports that contain significant findings in its Semiannual Reports to Congress.

                                      The OIG did not issue any contract-related audit products with significant findings
                                      during this reporting period.




                                 Annex B. Peer Review Results
                                      We are providing the following in accordance with Section 989C of the Dodd-
                                      Frank Wall Street Reform and Consumer Protection Act (Public Law No. 111-203),
                                      which requires Inspectors General to disclose the results of its peer reviews in its
                                      Semiannual Reports to Congress.

                                      The OIG did not complete any peer reviews during this reporting period.




36   Office of Inspector General Semiannual Report
         Required Tables
The following provides acronyms, definitions, and other information relevant to
Tables 1–6.

Acronyms and Abbreviations Used in the Required Tables
FSA             Federal Student Aid
IES             Institute of Education Sciences
IG Act          Inspector General Act of 1978
ISU             Implementation and Support Unit
NCES            National Center for Education Statistics
OCFO            Office of the Chief Financial Officer
OCIO            Office of the Chief Information Officer
ODS             Office of the Deputy Secretary
OESE            Office of Elementary and Secondary Education
OPEPD           Office of Planning, Evaluation and Policy Development
OSERS           Office of Special Education and Rehabilitative Services
OUS             Office of the Under Secretary
PAG             Post Audit Group
PDL             Program Determination Letter
Recs            Recommendations

Definitions
Attestation Reports. Attestation reports convey the results of attestation
engagements performed within the context of their stated scope and objectives.
Attestation engagements can cover a broad range of financial and nonfinancial
subjects and can be part of a financial audit or a performance audit. Attestation
engagements are conducted in accordance with American Institute of Certified
Public Accountants attestation standards, as well as the related Statements on
Standards for Attestation Engagements.

Inspections. Inspections are analyses, evaluations, reviews, or studies of the
Department’s programs. The purpose of an inspection is to provide Department
decision makers with factual and analytical information, which may include an
assessment of the efficiency and effectiveness of their operations and
vulnerabilities created by their existing policies or procedures. 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 the Council of Inspectors General for
Integrity and Efficiency.

Questioned Costs. As defined by the Inspector General Act of 1978 (IG Act), as
amended, questioned costs are identified during an audit, inspection, or
evaluation because of (1) an alleged violation of a law, regulation, contract,



                                          Office of Inspector General Semiannual Report   37
                                      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. The OIG considers that category (3) of this
                                      definition would include other recommended recoveries of funds, such as
                                      recovery of outstanding funds or revenue earned on Federal funds or interest due
                                      the Department.

                                      Special Projects. Special projects include OIG work that is not classified as an
                                      audit, attestation, inspection, or any other type of alternative product.
                                      Depending on the nature and work involved, the special project may result in a
                                      report issued outside the OIG. Information presented in the special project report
                                      varies based on the reason for the special project (for example, response to
                                      congressional inquiry or other evaluation and analysis). The report may contain
                                      suggestions.

                                      Unsupported Costs. As defined by the IG Act, as amended, unsupported costs are
                                      costs that, at the time of the audit, inspection, or evaluation, were not supported
                                      by adequate documentation. These amounts are also included as questioned
                                      costs.

                                      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 exemption. Consistent with the Freedom of
                                      Information Act, and to the extent practical, OIG redacts exempt information
                                      from the product so that nonexempt information contained in the product may be
                                      made available on the OIG Web site.




38   Office of Inspector General Semiannual Report
                        Reporting Requirements of the
                      Inspector General Act, as Amended
                                                        Requirement
           Section                                                                                          Table Number
                                                        (Table Title)

5(a)(1) and 5(a)(2)    Significant Problems, Abuses, and Deficiencies                                            N/A

5(a)(3)                Uncompleted Corrective Actions                                                              1
                       Significant Recommendations Described in Previous Semiannual Reports to
                       Congress on Which Corrective Action Has Not Been Completed
                       (October 1, 2014, Through March 31, 2015 )

5(a)(4)                Matters Referred to Prosecutive Authorities                                                 7
                       Statistical Profile for October 1, 2014, Through March 31, 2015

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                                                                          2
                       Audit and Other Reports and Products on Department Programs and Activities
                       (October 1, 2014, Through March 31, 2015)

5(a)(7)                Summary of Significant Audits                                                             N/A

5(a)(8)                Questioned Costs                                                                            3
                       Audit and Other Reports With Questioned or Unsupported Costs

5(a)(9)                Better Use of Funds                                                                         4
                       Audit and Other Reports With Recommendations for Better Use of Funds

5(a)(10)               Unresolved Reports
                       Unresolved Audit Reports Issued Before October 1, 2014                                     5-A

                       Summaries of Audit Reports Issued During the Previous Reporting Where
                       Management Decision Has Not Yet Been Made                                                  5-B


5(a)(11)               Significant Revised Management Decisions                                                  N/A

5(a)(12)               Significant Management Decisions With Which the OIG Disagreed                               6
                       Significant Management Decisions With Which the OIG Disagreed

5(a)(13)               Unmet Intermediate Target Dates Established by the Department Under the                   N/A
                       Federal Financial Management Improvement Act of 1996




                                                                            Office of Inspector General Semiannual Report   39
       Table 1. Significant Recommendations Described in Previous Semiannual
       Reports to Congress on Which Corrective Action Has Not Been Completed
                       (October 1, 2014, Through March 31, 2015 )
Section 5(a)(3) of the IG Act, as amended, requires identification of significant recommendations described in
previous Semiannual Reports on which management has not completed corrective action.

This table is limited to OIG internal audit reports of Departmental operations because that is the only type of
audit in which the Department tracks each related recommendation through completion of corrective action.

             Report            Report Title                        Date of    Number of     Number of
                                                        Date                                               Projected
Office      Type and        (Prior SAR Number                    Management   Significant   Significant
                                                       Issued                                             Action Date
             Number             and Page)                         Decision    Recs Open     Recs Closed

FSA         Audit         Fiscal Year 2013            12/11/13    2/27/14         1             9          9/29/15
            A17N0002      Financial Statements
                          Federal Student Aid
                          (SAR 68, page 43)

OCFO        Audit         Fiscal Year 2013            12/11/13    3/27/14         1             9          9/29/15
            A17N0001      Financial Statements
                          U.S. Department of
                          Education
                          (SAR 68, page 43)

OCIO        Audit         Audit of the U.S.           11/13/13    1/16/14         1             19         10/30/15
            A11N0001      Department of
                          Education’s
                          Compliance with the
                          Federal Information
                          Security Management
                          Act of 2002 for Fiscal
                          Year 2013 (SAR 68,
                          page 43)

OCIO        Audit         The U.S. Department         11/7/12      1/8/13         1             19         9/30/15
            A11M0003      of Education’s
                          Compliance with the
                          Federal Information
                          Security Management
                          Act of 2002 for Fiscal
                          Year 2012 (FSA is also
                          designated as an action
                          official) (SAR 66,
                          page 39)

OCIO        Audit         The U.S. Department         10/18/11     1/3/12         1             17         1/29/16
            A11L0003      of Education’s
                          Compliance with the
                          Federal Information
                          Security Management
                          Act for Fiscal Year 2011
                          (FSA is also designated
                          as an action official)
                          (SAR 64, page 36)

OSERS       Audit         Local Educational           7/25/13     9/26/13         11            1          5/25/15
            A09L0011      Agency Maintenance of
                          Effort Flexibility Due to
                          Recovery Act IDEA,
                          Part B Funds (SAR 67,
                          page 44)


40    Office of Inspector General Semiannual Report
       Table 2. Audit and Other Reports and Products on Department Programs and
                  Activities (October 1, 2014, Through March 31, 2015)

Section 5(a)(6) of the IG Act, as amended, requires a listing of each report completed by OIG during the
reporting period. We have also included reports issued by independent public accountants under the OIG’s
oversight.

                                                                                 Questioned
                 Report Type                                          Date     Costs (Includes     Unsupported         Number of
     Office                                  Report Title
                 and Number                                          Issued     Unsupported           Costs              Recs
                                                                                   Costs)

FSA              Audit            Federal Student Aid’s             3/24/15           -                   -                 9
                 A05N0012         Oversight of Schools’
                                  Compliance with the Incentive
                                  Compensation Ban

FSA              Audit            Pell Grant Lifetime Eligibility   3/31/15           -                   -                 -
                 A06O0002         Limit

FSA              Audit            The U.S. Department of            12/11/14          -                   -                 5
                 A09N0011         Education’s Administration of
                                  Student Loan Debt and
                                  Repayment (The report
                                  addresses OUS as the lead
                                  action official)

FSA              Audit            Fiscal Years 2014 and 2013        11/14/14          -                   -                 4
                 A17O0002         Financial Statements Federal
                                  Student Aid (OCFO is also
                                  designated as an action
                                  official)

OCFO             Audit            Fiscal Years 2014 and 2013        11/14/14          -                   -                 4
                 A17O0001         Financial Statements U.S.
                                  Department of Education (FSA
                                  is also designated as an action
                                  official)

OCFO             Audit            Fiscal Years 2014 and 2013        11/17/14          -                   -                 -
                 A17O0003         Closing Package Financial
                                  Statements U.S. Department of
                                  Education

OCFO             Special          Completion of OIG Risk            2/10/15           -                   -                22
                 Project          Assessment of the
                 S19O0005         Department’s Purchase Card
                                  Program for Fiscal Year 2013

OCIO             Audit            The U.S. Department of            11/12/14          -                   -                20
                 A11O0001         Education’s Compliance with
                                  the Federal Information
                                  Security Management Act of
                                  2002 for Fiscal Year 2014
                                  (The report and the
                                  recommendations are
                                  addressed to ODS and OUS)



2
    Special Project Report S19O0005 contains 2 suggestions.


                                                                                  Office of Inspector General Semiannual Report   41
                                                                               Questioned
                 Report Type                                        Date     Costs (Includes   Unsupported   Number of
     Office                                 Report Title
                 and Number                                        Issued     Unsupported         Costs        Recs
                                                                                 Costs)

    OESE         Audit            U.S. Department of               1/15/15          -               -            3
                 A04N0012         Education’s Implementation
                                  and Oversight of Approved
                                  Elementary and Secondary
                                  Education Act Flexibility
                                  Requests

    OESE         Attestation      Office of Inspector General’s    2/13/15          -               -            -
                 B19P0005a        Independent Report on the
                                  U.S. Department of
                                  Education’s Performance
                                  Summary Report for Fiscal
                                  Year 2014, dated February 11,
                                  2015

    OPEPD        Attestation      Office of Inspector General’s    1/29/15          -               -            -
                 B19P0005         Independent Report on the
                                  U.S. Department of
                                  Education’s Detailed
                                  Accounting of Fiscal Year 2014
                                  Drug Control Funds, dated
                                  January 26, 2015

    OSERS        Audit            Payback Provisions of the        3/3/15           -               -           11
                 A19O0004         Personnel Development to
                                  Improve Services and Results
                                  for Children with Disabilities
                                  Program

    Total                                                                          $0              $0           583




3
    Figure includes 2 suggestions and 56 recommendations.


42     Office of Inspector General Semiannual Report
     Table 3. Audit and Other Reports With Questioned or Unsupported Costs

Section 5(a)(8) of the IG Act, as amended, requires for each reporting period a statistical table showing the total
number of audit and inspection reports, the total dollar value of questioned and unsupported costs, and
responding management decision.

None of the products reported in this table were performed by the Defense Contract Audit Agency.


                                                                        Questioned Costs
                    Requirement                        Number              (Includes                Unsupported Costs
                                                                       Unsupported Costs)

A. For which no management decision has been made
   before the commencement of the reporting period           11                   $66,273,365                 $18,518,735


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

       Subtotals (A + B)                                     11                 $66,273,365                $18,518,735

C. For which a management decision was made during
   the reporting period                                       1                    $736,582                    $373,643

       (i) Dollar value of disallowed costs                                        $736,582                    $373,643
       (ii) Dollar value of costs not disallowed                                         $0                          $0

D. For which no management decision was made by
                                                             10                 $65,536,783                $18,145,092
   the end of the reporting period




                                                                          Office of Inspector General Semiannual Report    43
                                   Table 4. Audit and Other Reports With
                                  Recommendations for Better Use of Funds

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.

None of the products reported in this table were performed by the Defense Contract Audit Agency. The OIG did
not issue any inspection or evaluation reports identifying better use of funds during this reporting period.


                                Requirement                            Number                 Dollar Value

 A. For which no management decision has been made before the
                                                                                0                             $0
    commencement of the reporting period

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

         Subtotals (A + B)                                                      0                              $0

 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 to
                                                                                0                             $0
       by management

 D. For which no management decision was made by the end of the
                                                                                0                             $0
    reporting period




44    Office of Inspector General Semiannual Report
          Table 5-A. Unresolved Audit Reports Issued Before October 1, 2014

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.
Summaries of the audit and inspection reports issued during the previous SAR period follow in Table 5-B.

Summaries of the audit reports issued during the previous SAR period follow in Table 5-B. Reports that are new
since the last reporting period are labeled “New” after the report number. All other reports were reported in a
previous SAR.

                                                                                                 Total
           Report Type                                                            Date                           Number of
 Office                     Report Title (Prior SAR Number and Page)                           Monetary
           and Number                                                            Issued                            Recs
                                                                                               Findings

FSA       Audit          Review of Student Enrollment and Professional          9/23/04        $2,458,347             7
          A04E0001       Judgment Actions at Tennessee Technology
                         Center at Morristown (SAR 49, page 14)

                         Current Status: FSA informed us that the draft
                         audit determination/PDL is currently under
                         review.

FSA       Audit          Audit of Saint Louis University’s Use of               2/10/05        $1,458,584             6
          A06D0018       Professional Judgment from July 2000 through
                         June 2002 (SAR 50, page 21)

                         Current Status: FSA informed us that the draft
                         audit determination/PDL is currently under
                         review.

FSA       Audit          Capella University’s Compliance with Selected          3/7/08          $589,892              9
          A05G0017       Provisions of the HEA and Corresponding
                         Regulations (SAR 56, page 25)

                         Current Status: FSA informed us that it is
                         currently working to resolve this audit.

FSA       Audit          Ashford University’s Administration of the Title IV    1/21/11         $29,036               13
          A05I0014       HEA Programs (SAR 62, page 24)

                         Current Status: FSA informed us the audit was
                         placed on hold due to litigation dealing with
                         incentive compensation.

FSA       Audit          Saint Mary-of-the-Woods College’s Administration       3/29/12       $42,362,291             19
          A05K0012       of the Title IV Programs (SAR 64, page 36)

                         Current Status: FSA informed us that the draft
                         audit determination/PDL is currently under
                         review.

FSA       Audit          Metropolitan Community College’s Administration        5/15/12         $232,918              22
          A07K0003       of Title IV Programs (SAR 65, page 40)

                         Current Status: FSA informed us that it is
                         currently working to resolve this audit.




                                                                               Office of Inspector General Semiannual Report   45
                                                                                                  Total
             Report Type                                                              Date                   Number of
 Office                           Report Title (Prior SAR Number and Page)                      Monetary
             and Number                                                              Issued                    Recs
                                                                                                Findings

 FSA         Audit             Colorado Technical University’s Administration of    9/21/12     $173,164         8
             A09K0008          Title IV Programs (SAR 65, page 40)

                               Current Status: FSA informed us that it is
                               currently working to resolve this audit.

 OESE        Audit             Oklahoma: Use of Funds and Data Quality for          2/18/11    $16,150,803      10
             A06K0002          Selected Recovery Act Programs (OESE and OSERS
                               are also designated as action officials)
                               (SAR 62, page 25)

                               Current Status: OCFO/PAG PDL was issued on
                               9/21/2012. OESE PDL was issued on 9/25/2012.
                               ODS/ISU PDL was issued on 1/8/2013. OSERS
                               informed us that it sent a follow-up message to
                               the State on 3/27/2015 requesting additional
                               information to address the findings.

 OESE        Audit             The Ohio Department of Education’s                   9/2/14      $30,748         12
             A05N0009          Administration of its Race to the Top Grant
             (NEW)             (OCFO is also designated as an action official)
                               (SAR 69, page 45)

                               Current Status: OESE informed us that it is
                               currently working to resolve this audit. OCFO/
                               PAG PDL was issued on 3/31/2015.

 OPEPD       Audit             Georgia Department of Education’s Controls Over      4/7/10          -            9
             A04J0003          Performance Data Entered in EDFacts (SAR 61,
                               page 34)

                               Current Status: Because EDFacts is now
                               administered by IES/NCES, OPEPD is currently
                               working with IES to resolve this audit.

 OSERS       Audit             Systems of Internal Controls over Selected           12/16/10   $2,051,000       16
             A04K0001          Recovery Act Funds in Puerto Rico (OCFO, OESE,
                               and OSERS are also designated as action officials)
                               (SAR 62, page 25)

                               Current Status: OSERS informed us that the final
                               PDL is currently under review.

 Total                                                                                         $65,536,783      131




46   Office of Inspector General Semiannual Report
   Table 5-B. Summaries of Audit Reports Issued During the Previous Reporting
               Where Management Decision Has Not Yet Been Made

Section 5(a)(10) of the IG Act, as amended, requires a summary of each audit, inspection, or evaluation report
issued before the commencement of the reporting period for which no management decision has been made by
the end of the reporting period. These are the narratives for new entries. Details on previously issued reports
can be found in Table 5-A of this Semiannual Report.



              Report Title,
 Office     Number, and Date                                     Summary and Current Status
                 Issued

OESE       The Ohio Department     Our audit sought to determine whether the Ohio Department of Education (the Ohio SEA)
           of Education’s          accurately and completely reported Race to the Top grant performance data to the
           Administration of its   Department, ensured that it and its participating LEAs and charter schools would have
           Race to the Top         the capacity to deliver and sustain results described in its Race to the Top grant
           Grant (OCFO is also     application after all Federal funds had been expended, and whether they spent Race to
           designated as an        the Top funds only on allowable activities and in accordance with program requirements
           action official)        and the Ohio SEA’s approved grant application. We found that although the Ohio SEA
           (SAR 69, page 45)       reported all required performance data for the two areas reviewed and ensured that it
                                   and the LEAs reviewed had the capacity to deliver and sustain results, it did not always
           Audit A05N0009          report accurate data and did not ensure that the LEAs spent Race to the Top funds on
                                   allowable activities and in accordance with program requirements and the Ohio SEA’s
           9/2/2014                approved grant application. We recommended that the Ohio SEA improve the accuracy of
                                   its reported data and the administration of its Race to the Top grant by taking a number
                                   of actions, including that it obtain supporting documentation for applicable performance
                                   data so it can verify progress towards those measures, disclose in its annual performance
                                   report when it has not verified or does not have documentation to support the reported
                                   performance data, retain documents used to support reported performance data, and
                                   more closely monitor the fiscal activity of participating LEAs and charter schools to
                                   ensure that they comply with all Federal fiscal requirements. The Ohio SEA neither
                                   agreed nor disagreed with our findings or recommendations.

                                   Current Status: OESE informed us that it is currently working to resolve this audit.
                                   OCFO/PAG PDL was issued on 3/31/2015.




                                                                                Office of Inspector General Semiannual Report   47
      Table 6. Significant Management Decisions With Which the OIG Disagreed

Section 5(a)(12) of the IG Act, as amended, requires information concerning any significant management decision
with which the Inspector General is in disagreement.



 Office                                              Summary of Issue and OIG Disagreement


OPE          On October 31, 2014, the Department issued final regulations for gainful employment programs to address
             concerns about gainful employment programs that leave students with unaffordable levels of loan debt in relation
             to their earnings or lead students to default. Although the OIG supports the Department’s efforts on defining
             gainful employment, we nonconcurred with the final regulations due to concerns with one key provision. Under
             the final rule, the Department established an accountability framework whereby gainful employment programs
             would be evaluated based on measures of “discretionary income rates” and “annual earnings rates” as a way to
             assess whether the programs provided students with sufficient income to meet their debt obligations. However,
             in calculating these two rates, the Department allowed institutions flexibility in determining annual loan
             payments to use the lesser of either (1) annual payments required to meet the median loan debt of students who
             completed the program or (2) annual payment amounts based on the direct costs to students. Direct costs include
             tuition, fees, books, equipment, and supplies, and exclude indirect costs such as room and board and
             transportation. We nonconcurred with this decision because it favored institutions to the detriment of students
             when students’ actual loan debt is higher than the direct costs. We noted that the annual payment amount used
             in the calculations should be based on only the actual student loan debt incurred as a result of enrolling in and
             completing a gainful employment program. The Department countered that gainful employment programs should
             not be held accountable for borrowing for indirect costs that are beyond the institution’s control. We expressed
             our concern that a program did not prepare the student for gainful employment if the student cannot repay his or
             her loan debt. Furthermore, we stated that institutions have the ability to influence what students borrow,
             through financial aid counseling for example, and therefore have some ability to affect what students borrow to
             cover their indirect costs. As a result, we disagree with the Department’s final rule in this regard because it
             could allow some gainful employment programs to maintain their eligibility for the Federal Student Aid programs
             authorized under Title IV of the HEA when such programs would fail the accountability metrics if the student’s
             full loan debt were taken into consideration.




48   Office of Inspector General Semiannual Report
Table 7. Statistical Profile for October 1, 2014, Through March 31, 2015

                                                                                        October 1, 2014–
                                      Audits, Inspections, Other Products
                                                                                         March 31, 2015

                         Audit Reports Issued                                                               9

                         Inspection Reports Issued                                                          0

                         Questioned Costs (Including Unsupported Costs)                                 $0

                         Recommendations for Better Use of Funds                                        $0

                         Other Products Issued                                                              3

                         Reports Resolved By Program Managers                                           10

                         Questioned Costs (Including Unsupported Costs) Sustained                $736,582

                         Unsupported Costs Sustained                                             $373,643

                         Additional Disallowances Identified by Program Managers                  $80,230

                         Management Commitment to the Better Use of Funds                               $0

                         Investigative Cases Opened                                                     47

                         Investigative Cases Closed                                                     35

                         Cases Active at the End of the Reporting Period                              305

                         Prosecutorial Decisions Accepted                                               33

                         Prosecutorial Decisions Declined                                               62

                         Indictments/Informations                                                       72

                         Convictions/Pleas                                                              46

                         Fines Ordered                                                        $1,347,199

                         Restitution Payments Ordered                                         $9,389,034

                         Civil Settlements/Judgments (number)                                           17

                         Civil Settlements/Judgments (amount)                                 $1,662,946

                         Recoveries                                                                     $0

                         Forfeitures/Seizures                                                 $3,308,132

                         Estimated Savings                                                   $38,336,812

                         Suspensions Referred to Department                                             17

                         Debarments Referred to Department                                              36

                         Debarments Imposed by OIG                                                          0




                                                            Office of Inspector General Semiannual Report       49
50   Office of Inspector General Semiannual Report
Acronyms and
Abbreviations
         Acronyms and Abbreviations Used in This Report
                        CIGIE                        Council of Inspectors General on Integrity and Efficiency
                        Department                   U.S. Department of Education
                        FAFSA                        Free Applications for Federal Student Aid
                        FISMA                        Federal Information Security Management Act of 2002
                        FSA                          Federal Student Aid
                        FY                           Fiscal Year
                        GED                          Certificate of High School Equivalency
                        HEA                          Higher Education Act of 1965, as Amended
                        IPERA                        Improper Payments Elimination and Recovery Act
                        LEA                          Local Educational Agency
                        OIG                          Office of Inspector General
                        OPE                          Office of Postsecondary Education
                        Recovery Act                 American Recovery and Reinvestment Act of 2009
                        Recovery Board               Recovery Accountability and Transparency Board
                        SEA                          State Educational Agency
                        SES                          Supplemental Educational Services
                        Title I                      Elementary and Secondary Education Act, Title I
                        Title IV                     Higher Education Act of 1965, Title IV




                        For acronyms and abbreviations used in the required tables, see page 37.




52   Office of Inspector General Semiannual Report
               FY 2015 Management Challenges
               The Reports Consolidation Act of 2000 requires the OIG to identify and summarize the most
               significant management challenges facing the Department each year. Below are the
               management challenges OIG identified for FY 2015.

       1. Improper Payments, meeting requirements and intensifying efforts to prevent, identify, and
          recapture improper payments.

       2. Information Technology Security, including management, operational, and technical security
          controls to adequately protect the confidentiality, integrity, and availability of its systems and
          data.

       3. Oversight and Monitoring, including Federal student aid program participants, distance education,
          grantees, and contractors.

       4. Data Quality and Reporting, specifically program data reporting requirements to ensure that
          accurate, reliable, and complete data are reported.

       5. Information Technology System Development and Implementation, specifically processes related
          to oversight and monitoring of information technology system development and implementation.

For a copy of our FY 2015 Management Challenges report, visit our Web site at www.ed.gov/oig.




All images used with permission from Microsoft.
Anyone knowing of fraud, waste, or abuse involving U.S. Department
of Education funds or programs should contact the Office of
Inspector General Hotline:

http://www2.ed.gov/about/offices/list/oig/hotline.html

We encourage you to use the automated complaint form on our Web
site; however, you may call or write the Office of Inspector General.

Inspector General Hotline                Call Toll-Free:
U.S. Department of Education             Inspector General Hotline
Office of Inspector General              1-800-MISUSED
400 Maryland Ave., S.W.                  (1-800-647-8733)
Washington, D.C. 20202


You may make your report anonymously.

The mission of the Office of Inspector General is to promote the
efficiency, effectiveness, and integrity of the U.S. Department of
Education’s programs and operations.

http://www2.ed.gov/oig