oversight

Semiannual Report - April 01, 2016 - September 30, 2016

Published by the Department of Education, Office of Inspector General on 2016-09-30.

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

Semiannual Report
to Congress, No. 73
April 1, 2016–September 30, 2016
U.S. Department of Education
Office of Inspector General
Office of Inspector General
Kathleen S. Tighe
Inspector General

November 2016

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. 73.




Please Note:
The Inspector General’s Semiannual Report to Congress, No. 73 is available on the
ED OIG Web site at http://www2.ed.gov/about/offices/list/oig/sarpages.html.


All images used under license from Shutterstock.com.
                              Message to Congress
On behalf of the U.S. Department of Education                      organizations and education management
(Department) Office of Inspector General (OIG), I                  organizations poses three significant risks to
present this Semiannual Report on the activities and               Department program objectives (1) financial
accomplishments of this office from April 1, 2016,                 risk, (2) risks associated with a lack of account-
through September 30, 2016. The audits, investigations,            ability over Federal funds, and (3) performance
and related work highlighted in the report are                     risk. We also found that the Department did not
products of our continuing commitment to promoting                 have effective internal controls to evaluate and
accountability, efficiency, and effectiveness through              mitigate the risk that charter school relation-
our oversight of the Department’s programs and                     ships with charter management and education
operations.                                                        management organizations pose to Department
                                                                   program objectives.
Over the last 6 months, we completed 35 investigations
involving fraud or corruption related to the Department’s     •	   The insurance carrier for a now-defunct chain
programs and operations, securing more than                        of for-profit cosmetology schools agreed to pay
$27 million in settlements, fines, recoveries, forfeitures,        more than $8.63 million to settle claims that
and savings. In addition, as a result of our investigative         the schools obtained Federal student aid for
work, criminal actions were taken against a number of              ineligible students who received bogus high
people, including school officials and service providers           school diplomas. The settlement was with the
who cheated the students they were in positions to                 insurance carrier because B&H Education, which
serve. We also issued 11 audit and other reports that              operated the schools, went out of business
contained recommendations to improve program                       earlier this year.
operations. The following are some examples of the
results of our audits and investigations over the last        •	   Our audit found that the Western Association
6 months.                                                          of Schools and Colleges Senior College and
                                                                   University Commission did not have internal
  •	   For the second year in a row, our audit deter-              controls in its accreditation process that could
       mined that the Department did not comply with               provide reasonable assurance that it properly
       the Improper Payments Elimination and Recovery              classified (for Federal student aid purposes)
       Act because it did not meet the reduction target            the methods of delivery of student learning
       for the William D. Ford Direct Loan program, its            for competency-based education programs.
       reported improper payment estimates for both
       the Direct Loan and the Pell grant programs            •	   In two separate investigations—one in California
       were inaccurate and unreliable, and its improper            and one in Minnesota—two men were found
       payment estimation methodologies for these                  guilty of conspiring to provide material support
       programs were flawed.                                       to the Islamic State in Iraq and Syria and using
                                                                   or attempting to use Federal student aid to
  •	   We issued a management information report to                provide such support.
       share our concerns regarding how commercial
       third parties are misusing the FSA ID and the          •	   The owner of ED4MIL was charged for allegedly
       Personal Authentication Service to take over                conspiring with university officials to defraud
       borrower accounts. Our report recommended                   veterans and Federal agencies of millions of
       changes to strengthen language on FSA’s Web                 dollars in tuition benefits under the Post 9/11
       site to enhance our ability to successfully inves-          GI bill.
       tigate and prosecute bad actors who prey on            •	   The Allen School of Health Sciences and its
       borrowers and illegally create, access, or make             former chief operating officer agreed to pay
       changes to their accounts.                                  more than $4.25 million to settle allegations
  •	   Our audit determined that charter school                    that they violated the incentive compensation
       relationships with charter management                       ban by providing improper incentives to the
       schools’ enrollment personnel and provided           prevent fraud and abuse, protect student interests,
       false or misleading job placement information        improve oversight and monitoring, and recoup taxpayer
       to prospective students.                             dollars.

  •	   Our audits found internal control weaknesses         In closing, I want to thank you for your support of
       in the Oregon Department of Education’s and          inspectors general. I look forward to continuing to work
       the Virginia Department of Education’s lon-          with you, the Department, and my colleagues in the
       gitudinal data systems that house personally         inspector general community to provide our nation’s
       identifiable information of K–12 students. These     taxpayers with assurance that the Federal Government
       weaknesses increase the risk that these State        is using their hard-earned money effectively and
       educational agencies will be unable to prevent       efficiently.
       or detect unauthorized access and disclosure
       of that information.

  •	   Our investigations led to criminal actions against
       a number of school officials, vendors, and service
                                                            Kathleen S. Tighe
       providers, including the former chief financial
                                                            Inspector General
       officer of the Grand Prairie Independent School
       District in Texas who allegedly stole approxi-
       mately $600,000 from the school district; the
       president of the Philuvine Development Center
       who pled guilty to obstructing a Federal audit
       in an attempt to conceal her theft of more than
       $261,000 in Migrant Education program funds;
       and the owners the Brilliance Academy and
       Babbage Net School who pled guilty to charges
       related to a multimillion dollar Supplemental
       Educational Services fraud scam. Actions were
       also taken against the former Director of Migrant
       Education for New Mexico and two high school
       Supplemental Educational Services coordinators
       in Texas for participating in the scam.

  •	   We determined that improvements were needed
       within the Department’s Office of School
       Support and Rural Programs’ monitoring of
       Rural Education Achievement Program grantees’
       performance and use of funds. Despite the need
       for improvements in monitoring, we concluded
       that the Department’s rural education coordina-
       tion efforts appear to be effective.

In this report, you will find more information on these
efforts, as well as summaries of other audits 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, when implemented, will help
                                                                        Contents
          GOAL 1                                                        GOAL 2
          Improve the                                                   Strengthen the Department’s
 Department’s ability                                                   efforts to improve the delivery
    to effectively and                                                  of student financial
efficiently implement                                                   assistance
         its programs


                 1                                                      9



                                    GOAL 3
                                    Protect the integrity 
                                    of the Department’s
                                    programs and operations   25

35
GOAL 4 Contribute to improvements
in Department business operations




                                                        Annexes and     Acronyms and
                                                      Required Tables   Abbreviations


                                                              47        59
Goal 1
Improve the Department’s ability
to effectively and efficiently
implement its programs.
                                              Office of Inspector General Semiannual Report  3




O       ur first strategic goal reflects our mission to promote the efficiency
        and effectiveness of the U.S. Department of Education’s (Department)
        programs. To achieve this goal, we conduct audits, investigations, and
other activities that examine Department programs impacting its mission to
promote student achievement and preparation for global competitiveness by
fostering educational excellence and ensuring equal access. 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. Investigative
work that contributed to this goal over the last 6 months includes cases
involving American Recovery and Reinvestment Act (Recovery Act) funding and
charter schools. Below are summaries of our audits and investigations related
to this goal.

                   Audits
                   During this reporting period, we issued two audits specific to this goal. The first
                   audit is our nationwide assessment of charter school management organizations and
                   education management organizations. This multi-State audit assessed the current
                   and emerging risk that charter school relationships with charter management
                   organizations and education management organizations pose to Department
                   program objectives and the effectiveness of the Department’s internal controls to
                   mitigate the risk. The audit focused on internal controls, which are integral to the
                   operations of any organization, as they are a means of identifying and managing
                   risks associated with Federal programs and a key component in preventing and
                   detecting fraud, waste, and abuse. The second audit report involved the Rural
                   Education Achievement Program, which provides more than $169 million each
                   year to rural school districts that may lack the personnel and resources to compete
                   effectively for Federal competitive grants and that often receive grant allocations
                   in amounts that are too small to be effective in meeting their intended purposes.
                   Our audit sought to determine whether the Department adequately monitored the
                   program’s grantees’ performance and use of funds, and to assess the effectiveness
                   of coordination efforts both within the Department and with other Federal agencies
                   involved in rural education. Summaries of these audits follow.

                   Nationwide Assessment of Charter Management and
                   Education Management Organizations
                   In conducting this audit, we assessed the current and emerging risk that charter
                   school relationships with charter management organizations and educational
                   management organizations (both referred to as charter management organizations
                   in our audit) pose to Department through (1) reviews we performed at selected
4  Office of Inspector General Semiannual Report




charter schools with charter management organizations, (2) the body of investigative
work the OIG performed regarding charter schools with charter management
organizations, and (3) State and local audit reports pertaining to charter schools
with charter management organizations. We judgmentally selected 6 States and
33 charter schools with charter management organizations as case studies and
reviewed the State educational agencies’ (SEAs) and authorizers oversight related to
those charter schools. We also reviewed internal controls and monitoring performed
at the Department. Based on our extensive review, we determined that charter
school relationships with charter management organizations pose a significant risk.
Specifically, we found that 22 of the 33 charter schools reviewed had 36 internal
control weaknesses related to the charter schools’ relationships with their charter
management organizations concerning conflicts of interest, related-party transactions,
and insufficient segregation of duties. These weaknesses represent significant risks
to the Department’s program objectives, including (1) financial risk, which is the
risk of waste, fraud, and abuse; (2) lack of accountability over Federal funds, which
is the risk that, as a result of charter school boards ceding fiscal authority to charter
management organizations, charter school stakeholders (the authorizer, SEA, and
Department) may not have accountability over




                                                        “
Federal funds sufficient to ensure compliance with
Federal requirements; and (3) performance risk,
which is the risk that the charter school stakeholders
may not have sufficient assurance that charter
schools are implementing Federal programs in
accordance with Federal requirements.                                These weaknesses
We also found that the Department did not                    represent significant risks to
have effective internal controls to evaluate and
mitigate those risks, nor did it implement adequate          the Department’s program
monitoring procedures that would provide sufficient
assurance that it could identify and mitigate the            objectives, including financial
risks specific to charter school relationships with
charter management organizations. In addition, the
                                                             risk, lack of accountability over
Department did not ensure that SEAs monitored
the relationships between charter schools and
                                                             Federal funds, and performance
charter management organizations in a manner
that would have addressed financial risk, lack of
                                                             risk.
accountability, and program performance risk. This
occurred in part because the Department did not
collect and analyze information needed to perform
a risk assessment and then tailor its monitoring procedures accordingly. Without
performing a risk assessment, the Department did not provide guidance to SEAs
related to the potential risks posed by charter schools with charter management
organizations.

We made a number of recommendations and suggestions to the Department to
address the weaknesses identified including that it convene a formal oversight group
to determine the most appropriate manner to conduct an analysis and assessment
of the risks to its programs posted by charter schools with charter management
organizations. We also suggested that the Department propose legislative changes
for Congress to consider that would clearly identify the governance responsibilities of
                            Office of Inspector General Semiannual Report  5




the Department and SEAs with respect to the roles, responsibilities, and expectations
of the administration and oversight over grants provided to charter schools and
require the Department to ensure the integrity of the grants provided to charter
schools, specifically with regard to the risks associated with charter management
organizations. Further, we suggested that the Department propose legislative changes
for Congress to consider that would clearly identify the governance responsibility of
authorizing entities with respect to the roles, responsibilities, and expectations of
the approval, renewal, and revocation of charters at a nationwide level and ensure
that either SEAs or the Department adequately oversee authorizing entities. The
Department agreed that there may be increased risk to Federal programs by charter
schools that are affiliated with certain management organizations and noted actions
it has taken or plans to take to address the risks. http://www2.ed.gov/about/offices/
list/oig/auditreports/fy2016/a02m0012.pdf

Department’s Oversight of the Rural Education
Achievement Program
Our audit found that improvements were needed in the Department’s Office of
School Support and Rural Programs’ (SSRP)—the Departmental unit responsible
for administering and overseeing the Rural Education Achievement Program—
monitoring of Rural Education Achievement Program grantees’ performance and
use of funds. Despite the need to improve SSRP’s monitoring, we concluded that
the Department’s rural education coordination efforts appear to be effective.

First, we found that SSRP had conducted very limited monitoring to determine
whether Rural Education Achievement Program grantees were making progress
toward program goals or spending grant funds in accordance with statutory and
regulatory guidelines. Instead, SSRP efforts were focused more on ensuring grantees
were obligating and spending funds by established deadlines. Of the nearly 4,300 local
educational agencies (LEA) that received grants each year from fiscal year (FY) 2011
through FY 2014, SSRP produced only 18 desk monitoring reports of 16 grantees. Over
the same time period, SSRP conducted no monitoring of the 44 SEAs that received
Rural and Low-Income Schools program grants each year. We also found that while
SSRP developed plans to monitor Rural Education Achievement Program grantees’
performance and use of funds for FY 2011 and FY 2012, these monitoring plans were
left in draft form and went largely unimplemented. SSRP did not develop monitoring
plans for subsequent years. Additionally, we noted that although SSRP collected
some data on grantees’ performance and use of funds, we found little evidence that
SSRP used any of that data to inform its monitoring efforts or provide assistance to
grantees in meeting program goals, even though grantees appeared to be having
difficulty meeting established performance targets. Without adequate monitoring
of grantee progress and use of funds, SSRP has little assurance as to whether Rural
Education Achievement Program grantees are making progress toward program
goals and objectives and little to no insight regarding what grantees are using
grant funds for, thereby significantly decreasing the likelihood that it will be able
to detect any instances where grantees are using funds for unallowable purposes.
Further, with regard to the Rural and Low-Income Schools program, SSRP lacked
assurance that its grantees—the SEAs—were conducting required monitoring of
their subgrantees to ensure compliance with applicable Federal requirements,
6  Office of Inspector General Semiannual Report




including that grantees were using funds only for allowable purposes and that
grantees were achieving performance goals.

Second, we determined that the Department was involved in various internal and
external rural education coordination efforts and that these efforts appeared to be
effective, as the Department had placed a greater emphasis on internal and external
rural coordination activities in the last several years. With effective coordination,
the Department has more assurance that it is maximizing its resources and efforts
in the area of rural education and may be able to produce a greater benefit to the
public than it could otherwise achieve on its own.

To help address the weaknesses identified, we made nine recommendations, including
that the Department ensure that SSRP staff develop, finalize, and implement adequate
plans to monitor Rural Education Achievement Program grantee performance and
use of funds and to implement a risk assessment process that it can use to select
grantees for monitoring. The Department noted the actions it was taking or that
it planned to take to address the recommendations. http://www2.ed.gov/about/
offices/list/oig/auditreports/fy2016/a19p0006.pdf


Recovery Act Investigations
Since the enactment of the Recovery Act, the OIG has initiated 227 criminal
investigations of various schemes involving improper use of Recovery Act funds.
These investigations have resulted in more than 400 criminal convictions and more
than $1.3 million in recoveries. Below is an example of one of our Recovery Act
investigations.

Civil Judgments Filed, Civil Settlement Reached With
Sendero Academy Charter School and its Former
Superintendent (Texas)
The former superintendent of Sendero Academy, a prekindergarten through 12th
grade charter school with two campuses in Texas, agreed to pay the government
$236,000 to settle claims that he and the school violated the False Claims Act.
The former superintendent and the school submitted a fraudulent voucher
for payment of Recovery Act funds to a bogus vendor to cover the cost of
playground equipment that the superintendent purchased separately at
auction. The former superintendent and the school also failed to disclose
his felony conviction on its charter school application and governance forms.
During the time period of the complaint, Sendero Academy received more
than $117,200 in Recovery Act funds. The U.S. Attorney’s Office for the Western
District of Texas also ordered a default judgment of more than $351,600 against
Sendero Academy.


Investigations of Charter Schools
From January 2005 through September 30, 2016, the OIG opened 74 charter school
investigations. To date, these investigations have resulted in 47 indictments and
39 convictions of charter school officials. The cases that have been fully settled
                                                       Office of Inspector General Semiannual Report  7




                           have resulted in more than $13.5 million in restitution, fines, forfeitures, and civil
                           settlements. Below is an example of one of our charter school investigations.

                           Former Chief Executive Officer of Pennsylvania Cyber
                           Charter School Pled Guilty in $8 Million Tax Fraud Scam
                           (Pennsylvania)
                           The former chief executive officer of the Pennsylvania Cyber Charter School pled
                           guilty to tax fraud charges. The former chief executive officer founded a series of
                           connected for-profit and not-for-profit entities to siphon taxpayer funds out of the
                           school to avoid Federal income tax liabilities. For more than 6 years, the former
                           chief executive officer and his accountant falsified corporate books and records and
                           shifted more than $8 million in income attributable to the chief executive officer
                           to the Federal income tax returns of other people to conceal the income from the
                           Internal Revenue Service. The accountant currently awaits prosecution.




OTHER ACTIVITIES
Participation on Committees, Work Groups, and Task Forces
Inspector General Community

   •	   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.

Review of Legislation, Regulations, Directives, and Memoranda
   •	   Department Draft Q&A, Rights of Children with Disabilities in Charter Schools Under the
        Individual with Disabilities Education Act. The OIG provided clarifying and technical suggestions.

   •	   Department Draft FAQs, OSEP Confidentiality for IDEA Early Childhood. The OIG provided
        clarifying suggestions.
Goal 2
Strengthen the Department’s
efforts to improve the delivery
of student financial assistance.
                                               Office of Inspector General Semiannual Report  11




T      his 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 fraud, waste, and abuse, but also to
protect the interests of the next generation of our nation’s leaders—America’s
students.




                    Audits and Reviews
                    The Department disburses more than $150 billion in student aid annually and
                    manages an outstanding loan portfolio of $1.2 trillion. This makes the Department
                    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 and the office of
                    Federal Student Aid (FSA) are responsible for administering and overseeing the
                    student aid programs. The Office of Postsecondary Education 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’s work identified actions that the Office of Postsecondary Education
                    and FSA should take to better protect the interests of students. Summaries of these
                    reports follow.

                    The Western Association of Schools and Colleges Senior
                    College and University Commission’s Classification of
                    Competency-Based Education Programs
                    Our audit found that the Western Association of Schools and Colleges Senior College
                    and University Commission’s (Commission)—a regional academic body responsible
                    for the accreditation of public and private universities and colleges in California,
                    Hawaii, Guam, American Samoa, the Northern Mariana Islands, Micronesia, and
                    Palau—control activities over reviewing schools’ proposed competency-based
                    education programs did not provide reasonable assurance that schools properly
12  Office of Inspector General Semiannual Report




classified the methods of delivery for competency-based education programs. As
a result, the Commission’s evaluations of the schools’ classifications of the methods
of delivery will not help the Department ensure that proposed competency-based
education programs are properly classified for Federal student aid purposes. We
found that the Commission did not evaluate whether proposed competency-
based education programs were designed to ensure faculty-initiated, regular, and
substantive interaction between faculty and students. According to Federal student
aid regulations, programs that are not designed to ensure such interaction should
be classified as programs delivered via correspondence, not distance education.
Classification as a correspondence program significantly impacts both students’
and schools’ eligibility for Federal student aid. Students enrolled in correspondence
courses may receive only a half-time Federal Pell grant award. Schools may not
award Federal student aid to any students if, during the school’s latest complete
award year, more than 50 percent of the school’s courses were correspondence
courses or 50 percent or more of the school’s regular students were enrolled in
correspondence courses.

When schools it accredited proposed new competency-based education programs,




                                                        “
the Commission did not apply substantive change review procedures that provided
reasonable assurance that the schools properly classified
competency-based education programs’ methods of
delivery. The Commission did not implement procedures
to provide reasonable assurance that schools properly
classified competency-based education programs’
                                                                     The Commission’s
methods of delivery because correspondence
education was not within its scope of recognition
                                                                evaluations will not help
by the Secretary. Therefore, the Commission did not
require peer reviewers, who reviewed the schools’
                                                                the Department ensure
proposed competency-based education programs, to                that proposed competency-
determine whether proposed programs should be more
appropriately considered correspondence education.              based education programs
In addition, although we did not identify any significant
weaknesses in the Commission’s control activities over          are properly classified
ensuring that proposed programs’ measurements of
student learning were properly identified as clock hours,       for Federal student aid
credit hours, or direct assessment, we did identify a
deficiency in the Commission’s processes for evaluating         purposes.
the accuracy and reliability of schools’ credit-hour
assignments. We found that during substantive change
reviews, the Commission did not always ensure that the
credit hours assigned to the programs from which schools derived competency-
based education programs met the Federal definition of a credit hour (effective
July 1, 2011). The Commission’s substantive change review policies and procedures
did not require either a thorough review of a school’s assignment of credit hours
to existing programs or a confirmation that such a review had taken place since
July 1, 2011. We also found that the Commission did not always follow its own
policy relevant to the review of credit hours. The Commission’s policy required
peer reviewers to review a school’s credit-hour policy as part of the substantive
                            Office of Inspector General Semiannual Report  13




change review process. However, the Commission approved one school’s proposed
programs without reviewing the school’s credit-hour policy.

To address the issues identified, we made a number of recommendations, including
that the Commission revise its policies and procedures for performing substantive
change reviews to ensure that it obtains sufficient information to determine whether
the interaction between faculty and students will be faculty-initiated, regular, and
substantive. If substantive change reviews find that the proposed programs are
not designed to ensure faculty-initiated, regular, and substantive interaction, the
Commission should notify the schools that the Commission is not authorized to
approve the programs for Federal student aid purposes because correspondence
education is not within the Commission’s scope of recognition. We also recommended
that the Commission develop procedures that will ensure it has reviewed, since July 1,
2011, a school’s assignment of credit hours for compliance with the Federal definition
before approving a substantive change for competency-based education programs.
The Commission did not explicitly agree or disagree with our findings; however, it
stated that it has taken or plans to take action to correct the issues identified. http://
www2.ed.gov/about/offices/list/oig/auditreports/fy2016/a05p0013.pdf

Misuse of FSA ID and the Personal Authentication Service
Based on the findings of recent investigative work, we issued a management
information report to inform FSA of our concerns regarding how commercial
third parties are misusing the FSA ID and the Personal Authentication Service to
take over borrower accounts. Our report recommended changes to strengthen
language and instructions on FSA Web sites using FSA ID to enhance our ability to
successfully investigate and prosecute third parties—particularly predatory loan
consolidators—who improperly create, access, or make changes to FSA IDs and
accounts. Our report also recommended that FSA increase its proactive monitoring of
FSA IDs and Personal Authentication Service audit logs, that it report any suspicious
activity to the Department’s Computer Incident and Response Capability unit and
the OIG, and that it take appropriate administrative action against companies or
people that misuse or abuse the system.

As detailed in the report, the OIG has investigated several loan consolidation
companies that accessed borrower accounts to consolidate loans or enroll borrowers,
including those who were not eligible, in debt forgiveness or reduction programs
and charging borrowers unnecessary fees for such services. In 2015, the OIG
investigated whether one or more U.S.-based entities were perpetrating a possible
fraud scheme by offering questionable student loan consolidation or forgiveness
services to borrowers and aggressively trying to get the borrowers to provide their
account and loan information. Although we substantiated the allegation, we could
not successfully pursue the matter criminally because FSA’s Web site instructions
for creating an FSA ID do not explicitly prohibit third-party access to borrower
accounts—especially in cases where the third party accessed the borrower’s account
for the purposes of commercial advantage or financial gain.

In December 2015, the OIG suggested that the Department add banner language
to its Web sites to specifically address unauthorized third-party users to better
protect borrowers and enable the OIG to successfully pursue criminal prosecution
against bad actors. The OIG provided the banner language. The Department,
14  Office of Inspector General Semiannual Report




however, declined to take this action; it favored alternative remedies such as
issuing cease and desist letters to third-party violators. As stated in our report,
this is an ineffective remedy, as such letters serve only to attempt to prevent
future access, do not allow the potential criminal prosecution of past illegal use
of the system, and prohibit the Department from obtaining any restitution or
fines for potential illegal activity.

The report recommended three actions for FSA to take to better protect borrowers
from predatory third parties and support criminal investigations and prosecutions
of these third parties, and three actions it could take to proactively monitor its
systems, take administrative action against predatory third parties, and strengthen
Personal Authentication Service audit logs. FSA did not explicitly agree or disagree
with the issues identified or our recommendations. FSA proposed corrective actions
that we found to be responsive to many of our recommendations; however, it did
not provide complete information on some planned corrective actions, and some
of the proposed actions are contingent on the results of FSA’s further research.
http://www2.ed.gov/about/offices/list/oig/alternativeproducts/x21q0001.pdf


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 Federal student aid funds, significant civil fraud actions
against entities participating in the Federal student aid programs, and hundreds
of millions of dollars returned to the Federal Government in fines, restitutions,
and civil settlements.

Insurer for the B&H Education Agrees to $8.6 Million
Settlement (California)
The insurance carrier for a now-defunct chain of for-profit cosmetology schools,
agreed to pay more than $8.6 million to resolve civil allegations that the school
obtained Federal student aid for ineligible students who received bogus high
school diplomas. B&H Education, which operated the now-defunct Marinello
Schools of Beauty, was accused of improperly assisting adult students who did
not have high school diplomas to obtain bogus high school diplomas. B&H
allegedly allowed students seeking high school diplomas to take their tests
without proctors, to use their phones and workbooks to look up answers during
tests, and to repeat the same tests until they passed. Many of the students that
received their high school diplomas through this program then enrolled at B&H,
and, with B&H’s assistance, applied for and received Federal student aid for which
they were not eligible.
                          Office of Inspector General Semiannual Report  15




Former President and Chief Executive Officer of Masters of
Cosmetology College Agreed to Pay $5.8 Million (Indiana)
The former president and chief executive officer of the for-profit Masters of
Cosmetology College pled guilty to charges related to Federal student aid fraud and
agreed to pay more than $5.8 million in restitution. The former president falsified
information in order to obtain student aid that far exceeded loan limits or on behalf
of students who were ineligible to receive the aid, forged student signatures on
student aid application forms, made misleading statements to students regarding
financial aid repayment, and transferred Federal student aid into her personal
investment account.

Allen School of Health Sciences and its Former Chief
Operating Officer Agreed to Pay Nearly $4.3 Million
(New York)
The Allen School of Health Sciences, a for-profit school with campuses in Brooklyn
and Queens, New York, and its former chief operating officer agreed to pay nearly
$4.3 million to settle allegations that they violated the incentive compensation
ban by providing improper incentives to the schools’ enrollment personnel and
provided false or misleading job placement information to prospective students.
The school agreed to pay $4.25 million and its former chief operating officer agreed
to pay $40,000.

Owner of FastTrain College Sentenced to Prison (Florida)
The owner of the now-defunct FastTrain College was sentenced to 8 years in prison
for orchestrating a massive fraud scheme. The former owner directed FastTrain
employees to recruit students who had not earned a valid high school diploma
or its equivalent, obtained fake high school diplomas for them, and falsified their
Federal 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 Federal student aid applications
containing falsified information were submitted to the Department, which yielded
some $4.1 million in Federal student aid, a good portion of which the owner used
to fund a lavish lifestyle.

Civil Settlement of $510,000 Reached With Four For-Profit
Schools (Texas)
Empowerment Schools Healthcare, Texas Medical Careers, Empowerment Schools,
and Med-Teach agreed to pay $510,000 to settle claims that they knowingly violated
the incentive compensation ban. The settlement resolved claims that the schools
made employment offers and offered paid time off and other rewards to admissions
representatives that were contingent on achieving a specific number of student
enrollments or starts within a certain time frame.
16  Office of Inspector General Semiannual Report




Former Owner of Alden’s School of Cosmetology Indicted
in Federal Student Aid Scheme (Louisiana)
The former owner and chief executive officer of Alden’s School of Cosmetology
and Alden’s School of Barbering was indicted on charges that included theft of
government funds, fraudulently obtaining financial assistance funds, aggravated
identity theft, misrepresentation, and money laundering. The indictment claims that
the former chief executive officer misrepresented that certain students attending
the schools were enrolled in Federal student aid-eligible programs when in fact they
were not, certified hours for students that were never completed, and transferred
criminally derived property between numerous bank accounts. As a result of these
alleged criminal actions, the former chief executive officer and the schools received
more than $100,000 in Federal student aid.

Former Suffolk University Employee Pled Guilty to Student
Loan Fraud (Massachusetts)
A former Suffolk University employee pled guilty to stealing more than $40,000 in
Federal student aid by falsifying her own student records. While employed in the
registrar’s office, the employee enrolled in the school’s MBA program but failed
to attend class or complete required course work. Instead, the employee used
her position and access to the school’s computer system to assign herself passing
grades for classes she never attended. By maintaining the appearance of being a
graduate student, the employee was able to obtain more than $40,000 in Federal
student aid, which she spent on vacations and other personal expenses.

Former Wilson Community College TRIO Program Director
Sentenced for Theft (North Carolina)
The former TRIO programs director at Wilson College was sentenced on charges
related to theft and fraud. The former director concocted false requisitions forms,
vouchers, and contracts; made payments to her boyfriend for financial literacy
workshops and services that he never provided; and submitted reimbursement
forms for work-related travel to events that she never attended. She also assisted
her boyfriend in stealing eight computers from the school’s TRIO offices, several
of the computers were pawned and others were found in the home the couple
shared. The former program director was sentenced to 4 years of probation and
was ordered to pay more than $27,250 in restitution.

Former Unitech Training Academy Financial Aid Officer
Pled Guilty to Fraud (Louisiana)
A former financial aid officer at Unitech Training Academy pled guilty to charges
related to student aid fraud. The former officer scammed unwitting students who
had received Federal student aid award balances by telling them that they owed
the school additional money for school fees including graduation fees, promissory
note fees, or out of pocket expenses. She then instructed them to cash their award
refund checks and pay the fees in cash to her. The former officer did not apply student
cash payments to their accounts and kept the money for her own personal benefit.
                            Office of Inspector General Semiannual Report  17




Former For-Profit School Employee Pled Guilty in Default
Rate Scam (New York)
A former employee in the loan management department of a for-profit school pled
guilty to charges related to student aid fraud. The former employee prepared and
submitted fraudulent applications for deferment or forbearance for student loans
administered by the Department. She did this to fraudulently lower the school’s
cohort default rate so that it would maintain its eligibility to participate in the Federal
student aid programs. From 2010 to 2014, the time period of this scam, the school
received about $93 million in Federal student aid.

Criminal Complaint Filed Against Former Official of Coral
Ridge Training School for Fraud and Identity Theft (Florida)
A criminal complaint was filed against a former financial aid official at the now-
defunct Coral Ridge Training School on charges of fraud and identity theft. The
former director allegedly used her position to apply for and receive more than
$80,000 in Federal student aid on behalf of students who did not want aid and
were not informed that someone had obtained the aid on their behalf.


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.

We also 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. To date, this project has identified more than
$31 million in potential fraud.

Action Taken Against Member of $1.9 Million Fraud Ring
(Florida)
In previous issues of our Semiannual Reports, we highlighted actions taken against
21 people, some of whom were Miami Dade Community College students, for their
roles in a fraud ring. During this reporting period, another participant was sentenced
to prison for his role in the scam. The ring obtained Higher One Financial Services
account information of more than 1,000 students and then used that information
to file fraudulent tax refunds to the Internal Revenue Service, directing the resulting
refunds—totaling some $1.9 million—to be deposited into bank accounts that they
controlled. The ring member was sentenced to serve 30 months in prison and 3
years of supervised release and was ordered to pay more than $98,400 in restitution.
18  Office of Inspector General Semiannual Report




Leader of $250,000 Fraud Ring Pled Guilty (Colorado)
The leader of a ring that targeted online courses and Federal student aid at various
community colleges in Colorado and New Mexico pled guilty to charges related
to student aid fraud. From 2007 through 2012, the woman recruited people to act
as “straw students,” completed admissions and Federal student aid application
forms often containing false information on their behalf, and took a portion of the
student aid award balance once received. As a result of her criminal efforts, the ring
fraudulently obtained more than $250,000 in student aid.

Repeat Student Aid Fraud Offender Sentenced (Florida)
A man who was sentenced to prison for student aid fraud in 2004 was sentenced in
August for another fraud scheme. The man and an accomplice used the identities of
numerous people, some without knowledge or permission, to fraudulently apply for
admission to attend online classes and receive Federal student aid from American
Public University, Art Institute of Pittsburgh, Colorado Technical University, Full Sail
University, Grand Canyon University, Liberty University, and Westwood College.
The repeat offender was sentenced to serve 17 months in prison and 36 months
supervised release and was ordered to pay more than $111,000 in restitution.

Participant in $105,000 Fraud Ring Sentenced (Missouri)
A man was sentenced for participating in a fraud ring that targeted online courses
and Federal student aid at Jefferson College. The man willfully provided his personally
identifiable information to the fraud ringleader who then used that information
to apply for admissions and Federal student aid from the school knowing that
the man had no intention of attending classes. The ringleader obtained nearly
$15,000 in Federal student aid using the man’s identity. The fraud ring participant
was sentenced to serve 7 months of home confinement and 3 years of supervised
release and was ordered to pay nearly $15,000 in restitution.

Final Member of $121,000 Fraud Ring Sentenced (Virginia)
In our last Semiannual Report, we shared that criminal actions were taken against
three women for their roles in a student aid and insurance company fraud scheme.
During this reporting period, the third and final member of the ring was sentenced
for her role in the scam. Between 2011 and 2014, the women submitted fraudulent
admissions and student aid applications to schools, including Liberty University, to
obtain Federal student aid funds for online classes they never intended to take. Two
of the women were also involved in a scheme to defraud insurance companies by
submitting insurance claims for fictitious car accidents. The woman was sentenced
to serve 24 months in prison and 3 years of supervisory release and was ordered to
pay more than $121,200 in restitution. Her two conspirators were each sentenced
to prison earlier this year for their roles in the ring.

Wife of Imprisoned Fraudster Sentenced (California)
The wife of a man who was sentenced to prison in 2014 for orchestrating a student
aid fraud ring scam was sentenced for her role in the scam. The OIG investigation
found that from 2009 through 2011, the couple targeted online classes and Federal
student aid at Cosumnes River College, American River College, and Solano
Community College. The two recruited people to act as straw students, completed
                                           Office of Inspector General Semiannual Report  19




                school admissions and student aid forms on their behalf, and took a portion of the
                student aid once received. The woman was sentenced to serve 6 months of home
                confinement followed by 12 months of probation and was ordered to pay more
                than $66,700 in restitution.

                Leaders of $140,900 Fraud Ring Pled Guilty (Virginia)
                Two people with criminal histories in multiple States pled guilty in Virginia to charges
                related to student aid fraud. The two used the identities of others—including
                relatives, friends, prison inmates, and a veteran convalescing in a military hospital—
                to fraudulently apply for more than $140,900 in Federal student aid from multiple
                schools, including Northern Virginia Community College.

                Leader of $17,400 Fraud Ring Sentenced (California)
                The leader of a fraud ring that targeted online courses and Federal student aid at
                San Diego College was sentenced to serve 12 months of home confinement and
                5 years of probation and was ordered to pay more than $17,400 in restitution. The
                ring leader recruited people to act as straw students and completed and submitted
                admissions forms and student aid applications on their behalf, knowing that the
                straw students were not academically qualified to attend the school and had no
                intention of attending classes.


                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. Although some of these cases involve
                criminals who used the identities of others (with and without consent) to exploit
                distance education programs in order to obtain Federal student aid, they are not
                fraud rings because they do not involve multiple fraud perpetrators.

                Men Found Guilty of Using Federal Student Aid to Support
                the Islamic State in Iraq and Syria (Minnesota, California)
                In previous Semiannual Reports, we highlighted actions against men for using or




“
                attempting to use Federal student aid to provide material support to the Islamic
                State in Iraq and Syria (ISIS). During this reporting period, more actions were taken
                in two separate cases. In the first case, three men were found guilty in Minnesota
                of conspiring to commit murder and provide material support to ISIS; one of them
                                                 was convicted for attempting to use Federal student
         Three men were                          aid to do so. The man used $2,400 in Federal student
                                                 aid to purchase a round-trip airline ticket to Greece
found guilty in Minnesota of                     with the intention of traveling to Syria to fight for
                                                 ISIS. In the second case, two men were found guilty in
conspiring to commit murder                      California for conspiring to provide material support to
                                                 ISIS. One of the men was also convicted of attempting
and provide material support                     to use Federal student aid to do so. The student used
to ISIS.
20  Office of Inspector General Semiannual Report




more than $671 in Federal student aid to purchase a plane ticket for another man
to travel to Turkey and eventually to Syria to join ISIS.

Owner of ED4MIL Charged in $35 Million GI Bill Fraud
Scheme (New Jersey)
The owner of the ED4MIL was charged with allegedly conspiring to defraud about
$35 million in tuition benefits under the Post 9/11 GI Bill. From 2009 through 2013,
the owner partnered with a New Jersey-based university to offer online, noncredit
training and certifications for veterans. The courses, however, were not approved
by the U.S. Department of Veterans Affairs nor were they being developed, taught,
or administered by the university. Instead, they were allegedly developed, taught,
and administered by an unapproved subcontractor and online correspondence
school that ED4MIL hired. Even though the university contributed no content or
value to the courses whatsoever, it charged the Post 9/11 GI Bill between 10 and 30
times the price that the online correspondence school charged.

New York University Graduate Student Sentenced in Million
Dollar Student Aid Fraud Scheme (New York)
A New York University graduate student was sentenced to prison for defrauding the
Department of more than $1 million by submitting false documents in connection
with his request for financial aid. From 2008 through 2013, the graduate student
submitted documentation to New York University to obtain additional financial
aid that was above the standard cost of attendance. The student submitted false
letters and documents purporting to be from doctors, his landlord, and a University
professor, which allowed him to receive more than $1 million in Federal student
aid. The graduate student was sentenced to serve 18 months in prison and 3 years
of supervised release and was ordered to pay more than $1.1 million in restitution

Man Who Stole Identity of Military Veteran Sentenced to
Prison (Missouri)
A man was sentenced to prison for using the stolen identity of a military veteran
to apply for and receive Federal grants and benefits, including nearly $15,000 in
student aid. From 2012 through 2014, the man used the stolen identity of a U.S. Navy
veteran to apply for and receive Federal Pell grant funds and student loans, as
well as health care benefits and retraining assistance from the U.S. Department of
Veterans Affairs. The man was sentenced to serve 51 months in prison and 3 years
of supervised release and was ordered to pay more than $234,400 in restitution.

Woman Sentenced for Using Multiple Social Security
Numbers to Obtain $108,000 in Student Aid (Texas)
A woman was sentenced to prison for obtaining three Social Security numbers in her
own name and using those as well as the identity of her mother and her ex-boyfriend
to apply for and receive nearly $100,000 in Federal student aid. From 2006 through
2014, the woman applied for multiple sources of financial aid at multiple schools,
funds that she did not use for educational purposes. She was sentenced to serve
                          Office of Inspector General Semiannual Report  21




12 months in prison and 2 years of supervised release and was ordered to pay more
than $108,000 in restitution.

Brother and Sister Sentenced to Prison for Roles in
$300,000 Fraud Scam (Nevada)
A brother and sister were sentenced to prison for using false identities to steal
almost $300,000 in Federal funds, including Federal student aid. The two falsely
claimed to be U.S. citizens when in fact they were citizens of Belize, and they used
false identities to apply for and receive the aid. The brother was sentenced to serve
87 months in prison and 3 years of supervised release and was ordered to pay about
$297,000 in restitution. His sister was sentenced to serve 65 months in prison and
3 years of supervised release and was ordered to pay $218,000 in restitution.

Former Store Owner Sentenced for Theft From Multiple
Federal Agencies (Michigan)
The former owner of the Detroit Fish Express Store was sentenced to prison for theft.
The store owner and his spouse completed and submitted applications for Federal
program funds that underreported or omitted the ownership of his business and
his true income. As a result, the man received more than $204,000 in Federal funds
to which he was not entitled, including more than $57,100 in Federal student aid.
He was sentenced to serve 6 months in prison and 2 years of supervised release
and was ordered to pay more than $204,200 in restitution, including more than
$57,000 to the Department.


Noteworthy News
New Audit Guide for Proprietary Schools
In September, the OIG issued the Guide for Audits of Proprietary Schools and For
Compliance Attestation Engagements of Third-Party Servicers Administering Title IV
Programs (Guide), providing instructions for how independent auditors should
evaluate for-profit colleges’ compliance with Federal student aid regulations.
Federal law and regulations require all schools participating in the Federal student
aid programs to have an annual financial and compliance audit performed by an
independent auditor. The regulations also require the OIG to produce a guide to assist
the schools and the auditors in meeting this requirement. The Guide has been revised
to require the auditor to perform a compliance audit of proprietary schools, not an
examination-level attestation engagement relative to the school’s management’s
assertions about compliance, as previously required. The Guide continues to require
compliance attestation engagements of third-party servicers. The Guide changes
the audit/attest procedures to presumptively mandatory, identified by the term
“should.” This is a change from the previous guide, which described the procedures
as “suggested.” The Guide reflects a significant number of statutory and regulatory
changes that were made since the previous guide was issued in 2000. Some of
these changes include instructions on gainful employment reporting, subsidized
loan eligibility time limit (also known as the 150-percent limit), and the debit card
22  Office of Inspector General Semiannual Report




provisions. In addition, the Guide includes improved testing requirements for the
90/10 revenue test, incentive compensation, and comprehensive reporting of related-
party transactions. These updates should result in more consistent auditing and
more accurate reporting. The Guide also gives detailed requirements for identifying
covered individuals or entities, reviewing and assessing relevant documentation, and
reviewing a sample of salary adjustments for covered individuals. Furthermore, it
puts an increased focus on the completeness and accuracy of information reported
to the Department and disclosed to students. Auditors are required to determine
the completeness and accuracy of gainful employment reporting and disclosures;
completion, graduation, and transfer-out rates; and job placement rates. The Guide
also requires testing of attendance for distance education programs. Finally, the
Guide provides for expanded testing for third-party servicers’ compliance with the
requirements applicable to the contracted Federal student aid services or functions,
regardless of whether the contracted services or functions are provided by the
servicer or by a subcontractor. A copy of the Guide and related materials can be
found on our Web site at http://www2.ed.gov/about/offices/list/oig/nonfed/sfa.html.
                                                   Office of Inspector General Semiannual Report  23




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, including issues related to negotiated
        rulemaking for student loan regulations and for teacher preparation regulations.

Review of Legislation, Regulations, Directives, and Memoranda
   •	   Department’s draft Letter to Accrediting Agency Directors Regarding Educational Quality
        through Innovative Partnerships. The OIG offered a clarifying suggestion.

   •	   Department’s draft Dear Colleague Letter on Third-Party Servicer Questions and Answers. The
        OIG provided technical comments.

   •	   Department’s draft Dear Colleague Letter Providing Guidance to Institutions on the Identification
        & Resolution of Possible Conflicting Information Resulting from the Use of 2015 Income &Tax Info
        for Both 2016-17 & 2017-18 Free Application Of Federal Student Aid. The IG provided comments
        to improve the quality and integrity of the document.

   •	   Department’s draft Notice of Proposed Rulemaking and draft Final Rule for Borrower Defense
        to Repayment regulations. The OIG provided technical and qualitative comments to improve the
        quality and integrity of the documents.
Goal 3
Protect the integrity of the
Department’s programs and operations.
                                               Office of Inspector General Semiannual Report  27




O       ur 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
                    In support of this goal, the OIG issued three audits. The first two audits examined
                    the internal controls two SEAs—the Oregon Department of Education and the
                    Virginia Department of Education—have to prevent, detect, report, and respond
                    to unauthorized access and disclosure of personally identifiable information of its
                    K–12 students contained in their Statewide Longitudinal Data Systems (SLDS). These
                    are the first two audits in our series of State reports on this issue. We will share the
                    findings of our additional work once completed. The third audit related to this goal
                    is an audit of the North Carolina Department of Instruction’s efforts to ensure that
                    LEAs took timely and appropriate action to correct single audit findings. The North
                    Carolina Department of Public Instruction is responsible for advising LEAs of the
                    requirements associated with the use of Federal funds and ensuring that they comply
                    with those requirements. As single audits are often the only on-site review of how
                    LEAs spend Federal dollars, correcting any findings identified in single audits is a
                    critical tool in protecting Federal funds from waste, fraud, and abuse. This was the
                    second report in our series on this issue; the first report involving the Massachusetts
                    Department of Elementary and Secondary Education was highlighted in our last
                    Semiannual Report. Below you will find summaries of the three reports.

                    Protection of Personally Identifiable Information in
                    Statewide Longitudinal Data Systems
                    The Department’s Institute for Educational Sciences provides grants to SEAs to
                    develop SLDSs that collect and maintain detailed, high-quality, student- and staff-
                    level data that are linked across entities and provide a complete academic and
                    performance history for each student. The grants also provide money for making
                    these data accessible through report and analysis tools. Due to the sheer volume
28  Office of Inspector General Semiannual Report




of personally identifiable information included in these systems, it is critical that
SEAs have established and implemented internal controls to protect these vital
data. Below are summaries of our audits of the Oregon Department of Education
and the Virginia Department of Education on this subject.

Oregon
Our audit found that the Oregon Department of Education (Oregon) Consolidated
Collection System, Oregon’s SLDS, had a lack of documented internal controls in
the system that increases the risk that Oregon will be unable to prevent or detect
unauthorized access and disclosure of personally identifiable information. Specifically,
we found that Oregon did not ensure that the Consolidated Collection System met
the minimum requirements in Oregon’s Department of Administrative Services
State Standards, which require the system controls and documentation of those
controls. Since Oregon did not meet the minimum State requirements, it was not
in compliance with the Institute of Education Sciences SLDS grant requirements. In
addition, Oregon had policies and procedures that address reporting and responding
to unauthorized access and disclosure of personally identifiable information in its data
system. However, we could not determine whether the procedures were effective
because Oregon had not reported any system breaches in the Consolidated Collection
System. We recommended that the Director of the Institute of Education Sciences
work with Oregon to ensure system controls identified in Oregon’s Information
Security Plan are implemented, the Consolidated Collection System meets minimum
State security standards, and determine whether a breach has occurred in the system
and report as necessary. Oregon did not agree with our finding but agreed with
our recommendations and identified actions it has taken or plans to take to address
them. http://www2.ed.gov/about/offices/list/oig/auditreports/fy2016/a02p0007.pdf

Virginia
Our audit found that the Virginia Department of Education (Virginia) used grant funds
to develop the Virginia Longitudinal Data System, a system that queries other State
systems to obtain longitudinal data for research purposes, and its Single Sign-on
Web System, which contains K–12 student data that Virginia Longitudinal Data
System queries. We focused our audit efforts on the Single Sign-on Web System
because it contains students’ personally identifiable information. We identified
internal control weaknesses in the system that increase the risk that Virginia will
be unable to prevent or detect unauthorized access and disclosure of personally
identifiable information. Specifically, we found that although Virginia classified the
Single Sign-on Web System as a sensitive system, it did not ensure that it met the
minimum State requirements for a system classified as sensitive. This meant that
Virginia also was not in compliance with the Institute of Education Sciences SLDS
grant requirements. We determined that Virginia has policies and procedures that
address reporting and responding to unauthorized access and disclosure of data, but
we could not determine whether Virginia effectively implemented the procedures
because Virginia has not reported any system breaches in the Virginia Longitudinal
Data System or the Single Sign-on Web System. Based on this finding, we made
several recommendations including that Virginia implement required system controls
to ensure the prevention and detection of unauthorized access and disclosure of
information contained in the Single Sign-on Web System. We also recommended
that it take appropriate action to determine whether a breach has occurred and, if so,
                           Office of Inspector General Semiannual Report  29




report and respond in accordance with established policies and procedures. Finally,
we recommended that Virginia address all outstanding recommendations related
to system security, as our audit determined that previous findings by the Virginia
Auditor of Public Accounts noted system control weaknesses that Virginia had not
adequately addressed. Virginia did not agree with our finding or recommendations.
http://www2.ed.gov/about/offices/list/oig/auditreports/fy2016/a02p0006.pdf

North Carolina Department of Public Instruction’s Oversight
of Local Educational Agency Single Audit Resolution
Our audit determined that the North Carolina Department of Public Instruction
(North Carolina) improved its oversight of LEA single audit resolution in recent years,
but further improvements were needed. Specifically, we found that North Carolina
implemented several effective oversight practices, including requiring LEAs to take
appropriate corrective actions to resolve audit findings, placing extra emphasis
on repeat findings to ensure they are resolved promptly, engaging in proactive
communication with LEAs related to audit resolution, issuing management decisions
for both Federal program findings and financial statement findings, and enhancing
management oversight over the audit resolution process. North Carolina was also
able to expedite the audit resolution process as a result of another North Carolina
State agency’s requirement that LEAs submit single audit reports 5 months before
the deadline specified in Office of Management and Budget policies. Despite these
effective practices, however, we found that North Carolina should take additional
action in several areas to ensure its oversight processes and practices meet all Federal
requirements and function effectively. For example, North Carolina did not have
adequate written policies and procedures describing all aspects of its oversight of
                           the LEA audit resolution process. North Carolina also did
                           not have an adequate system for tracking LEA findings
                           across audit periods or across the State, nor did it have
                           a quality assurance process for its oversight of LEA audit
                           resolution. Finally, even though North Carolina issued
                           management decisions for all LEA audit findings in the
                           last year of our audit period, its management decisions
                           did not meet all Federal content requirements. Based
                           on our finding, we recommended that North Carolina
                           finish developing and implementing written policies and
                           procedures for overseeing LEA single audit resolution,
                           establish an integrated tracking system for individual LEA
                           findings across the State, implement a periodic quality
                           assurance process to assess North Carolina’s effectiveness
                           in this area of oversight responsibility, and ensure that
                           North Carolina’s management decisions meet Federal
                           content requirements. North Carolina agreed with three
of the four recommendations and described steps it had taken or planned to take
to implement associated corrective actions. http://www2.ed.gov/about/offices/list/
oig/auditreports/fy2016/a09p0005.pdf
30  Office of Inspector General Semiannual Report




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

Former Grand Prairie Independent School District CFO
Indicted for Theft (Texas)
The former chief financial officer of the Grand Prairie Independent School District was
indicted on charges of program theft. The former chief financial officer, currently the
director of finance for the International Leadership of Texas organization, allegedly
stole about $600,000 from the Grand Prairie Independent School District.

Actions Taken Against El Paso Independent School District
Officials on Conspiracy Charges (Texas)
In 2012, the former superintendent of the El Paso Independent School District (El
Paso) was sentenced to prison for steering school contracts to his girlfriend and for
directing school district employees to change student records, reclassify student
grade levels, and take other actions to make it appear that the school district was
meeting or exceeding Adequate Yearly Progress standards in order to receive
financial bonuses. During this reporting period, actions were taken against seven
current and former El Paso employees for their roles in the scam. Two employees—a
former El Paso associate superintendent and a former director of priority schools—
pled guilty to conspiring with the former superintendent. Three others—another
former El Paso associate superintendent, a former principal of Austin High School,
and a former assistant principal at Austin High School—were indicted for their roles
in the conspiracy. In addition, two former Austin High School assistant principals
were charged for allegedly retaliating against school district employees whom
they thought had cooperated with Federal investigators during the course of the
investigation.

Former Beaumont Independent School District Assistant
Superintendent and Former Teacher Sentenced (Texas)
In our last Semiannual Report, we noted that a former Beaumont Independent
School District assistant superintendent pled guilty to theft and conspiracy, and a
former Beaumont Independent School District teacher pled guilty to conspiracy.
During this reporting period, the two were sentenced for their crimes. The former
assistant superintendent admitted to embezzling money from the school district,
including stealing money from a high school booster club and steering contracts
to family members totaling $480,000 for services that were never provided. This
included contracts to her son for printing services, which her son contracted out
                          Office of Inspector General Semiannual Report  31




and then billed the district at an exorbitant price. The former teacher was sentenced
for conspiring with the former assistant superintendent to increase standardized
test scores by providing teachers with test answer keys and by changing answers
on student test booklets. The former assistant superintendent was sentenced to
serve 40 months in prison and 3 years of supervised release and was ordered to
pay more than $500,000 in restitution. The former teacher was sentenced to serve
3 years of probation and was ordered to perform 300 hours of community service.

Owner of School Bus Company Charged With Federal Tax
Violations (Illinois)
The owner and president of the Jewel Bus Company, a company contracted to
provide bus services to Chicago Public School children, was charged with Federal tax
violations for allegedly spending the company’s money to purchase and renovate a
home and illegally deducting the funds in U.S. tax filings. From 2009 through 2011,
the owner allegedly transferred money from the bus company to another company
controlled by a relative who used it to purchase a $500,000 home. The owner also
spent more than $600,000 of the company’s money to renovate the house. The
owner allegedly concealed the scheme by telling the company’s tax preparers
that the transferred funds and the renovation costs were tax-deductible corporate
expenses. She also lied to an Internal Revenue Service officer during an interview
about her company’s failure to remit all required employment taxes.

President of Philuvine Development Center Pled Guilty to
Obstruction (Florida)
The president of Philuvine Development Center—a Migrant Education High School
Equivalency program grantee—pled guilty to obstructing a Federal audit. During
the course of a Department onsite review, the president provided doctored bank
records and other false documents to the auditors in an attempt to conceal the
fact that she used more than $261,000 in program funds on personal items such
as jewelry, clothing, and a matchmaking service.

School Principal Sentenced for Embezzlement (Puerto
Rico)
The former principal of the Manuel Mediavilla-Negron Vocational Technological
Public High School was sentenced for embezzling more than $67,000 in school
funds. The former principal cashed checks written to him from the school bank
account to pay for various personal bills, his fitness club membership, and online
shopping. The former principal was sentenced to serve 3 years of supervised release
and was ordered to pay more than $67,200 in restitution.

Former Buffalo School District Official Pled Guilty to Fraud
(New York)
The former supervisor of Title I programs for the Buffalo School District pled guilty
to stealing funds from Buffalo schools. The former supervisor awarded a fraudulent
school district contract to her son for computer and tutoring services that were
never provided. Her son submitted invoices to the school district seeking payment
32  Office of Inspector General Semiannual Report



for his ghost services, which his mother approved and paid on behalf of the school
district. As a result of their fraudulent efforts, the school district paid her son more
than $15,100 for services that were never provided.


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

Brilliance Academy/BabbageNet School Executives, Others
Pled Guilty to Fraud (Illinois)
A father and son team who controlled the Brilliance Academy and its wholly owned
subsidiary Babbage Net School—tutoring companies that received Supplemental
Educational Services funds from some 200 schools in 19 States across the country—
pled guilty to charges of fraud. The two misrepresented the tutoring services that
their companies provided, gave substandard educational materials to students,
falsely inflated invoices for tutoring services, and distributed false student programs
and improvement reports to the schools that paid the companies. In addition, the
father and son paid bribes to school officials and others in Texas and New Mexico in
exchange for their participation in the scam. One of these participants, the former
Director of Migrant Education for the State of New Mexico who also oversaw the
State’s Supplemental Educational Services programs, pled guilty to his role in the
scam; 2 other participants, a Supplemental Educational Services coordinator at Sam
Houston High School in San Antonio, and a Supplemental Educational Services
coordinator at Miller High School in Corpus Christi, entered into a pretrial diversion,
agreeing to pay $5,500 and$10,000 in restitution respectively and to perform
100 hours of community service.

Former Chief Financial Officer of American Tutor Pled
Guilty to $1.4 Million Tax Fraud Scheme (New Jersey)
The former chief financial officer of American Tutor pled guilty to charges of
corporate tax evasion and aiding and assisting in the filing of a false tax return.
The former chief financial officer, who is also a certified public accountant, filed a
tax return on behalf of the company that contained materially false information to
reduce the company’s tax liability. He also prepared and filed fraudulent tax returns
that excluded significant income for tax year 2010. He admitted that his fraudulent
actions resulted in a tax loss of more than $1.4 million to the Internal Revenue Service.
                                                      Office of Inspector General Semiannual Report  33




OTHER ACTIVITIES
Participation on Committees, Work Groups, and Task Forces
Federal and State Law Enforcement-Related Groups

    •	   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.

    •	   Government Accountability Office’s Domestic Working Group. Inspector General Tighe serves
         on this working group focused on advancing accountability in Federal, State, and local government.

Review of Legislation, Regulations, Directives, and Memoranda
    •	   Department Draft Dear Colleague Letter, Restraint and Seclusion in Public K-12 Education,
         Discrimination against Students with Disabilities, and Violations of Section 504 of Rehabilitation
         Act. The OIG made a clarifying suggestion.

    •	   Department Draft Notice Inviting Applications, Teacher and School Leader Incentive Fund
         Program. The OIG made clarifying suggestions.
Goal 4
Contribute to improvements in
Department business operations.
                                              Office of Inspector General Semiannual Report  37




E     ffective and efficient business operations are critical to ensure that 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 laws, policies, and regulations and the effective, efficient, and fair
use of taxpayer dollars with which it has been entrusted.




                    Audits and Reviews
                    OIG work completed over the last 6 months that contributed to this goal includes
                    our statutory audit involving the Department’s compliance with the Improper
                    Payments Elimination and Recovery Act of 2010 (IPERA), which requires Federal
                    agencies to conduct annual risk assessments to determine which programs are
                    susceptible to significant improper payments and to estimate, reduce, and recover
                    improper payments. We also issued a summary report presenting the overall
                    results of our series of audits involving external audit followup processes by four
                    Department offices—FSA, the Office of Elementary and Secondary Education, the
                    Office of Special Education and Rehabilitative Services, and the Office of the Chief
                    Financial Officer. We also issued an audit related to FSA’s oversight of information
                    technology projects, and a report of the results of our statutory Cybersecurity Act
                    review. Summaries of these reports follow.

                    Compliance With the Improper Payments Elimination and
                    Recovery Act for FY 2015
                    We found that the Department did not comply with the Improper Payments
                    Elimination and Recovery Act because its FY 2015 improper payment rate did not
                    meet the reduction target for the William D. Ford Federal Direct Loan (Direct Loan)
                    program. The Department established an FY 2015 reduction target of 1.49 percent for
                    the Direct Loan program; however the improper payment rate for the program was
                    2.63 percent after the Department recalculated this rate to correct for the formula
                    execution errors we identified during our audit. Therefore, the Department failed
                    to meet one of IPERA’s six compliance requirements.
38  Office of Inspector General Semiannual Report




                                             Similar to our previous IPERA audits,
                                             we found that the Department’s
                                             improper payment methodologies for
                                             the Federal Pell Grant and Direct Loan
                                             programs were flawed, as its estimation
                                             methodologies did not include all
                                             program reviews that could identify
                                             improper payments. We also found the
                                             estimation methodology for the Pell
                                             program excluded sources of improper
                                             payments, such as the Free Application
                                             for Federal Student Aid/Internal Revenue
                                             Service Data Statistical Study, and fraud.
                                             The estimation methodologies resulted
                                             in volatile improper payment estimates
that could be significantly influenced by a single program review. Further, the
estimation methodologies did not include all improper payments from ineligible
programs or locations identified in program reviews. In addition, we found that
Department’s reported improper payment estimates for both the Pell Grant and
Direct Loan programs were inaccurate and unreliable because spreadsheet formulas
used in the calculations were incorrect and the calculations deviated from the Office
of Management and Budget-approved methodologies.

We made nine recommendations to address the issues identified, including that
the Department analyze all available sources that identified improper payments
for root causes of such improper payments and evaluate FSA’s existing controls to
determine whether additional controls can be implemented, intensified, or expanded
to reduce improper payments. We also recommended that the Department revise
the improper payment estimation methodologies to include all improper payments
in the calculation of the improper payment estimates, such as improper payments
resulting from recipients submitting inaccurate self-reported income on the Free
Application for Federal Student Aid, all improper payments resulting from schools
disbursing Pell and Direct Loan funds to students enrolled in ineligible programs or
students attending ineligible locations, and other improper payments not identified
in program reviews. The Department agreed with our findings and agreed or partially
agreed with all of our recommendations. http://www2.ed.gov/about/offices/list/
oig/auditreports/fy2016/a02p0006.pdf

The Department’s Followup Process for External Audits
In previous Semiannual Reports, we summarized the findings of our series of audits
assessing the effectiveness of the Department in ensuring that external auditees
implement corrective actions made in OIG audit reports. This is an important
issue because not ensuring that auditees quickly take corrective actions allows
identified deficiencies to continue to exist, and the risk remains that auditees
will not effectively manage related programs and use funds as intended. We
examined these processes in the Department’s Office of Elementary and Secondary
Education, the Office of the Chief Financial Officer, the Office of Special Education
and Rehabilitative Services, and FSA. All of these reports found that the offices
needed to improve their external audit followup process. During this reporting
                            Office of Inspector General Semiannual Report  39




period, we issued our summary report highlighting the combined results from
these four audits. We noted that the Post Audit Group within the Office of the Chief
Financial Officer did not fulfill its responsibilities to ensure that action officials had
systems to follow up on corrective actions, monitor the Department’s compliance
with Office of Management and Budget Circular A-50, and ensure the overall
effectiveness of the Department’s audit resolution and followup system. We noted
that the Department closed 241 OIG external audits between October 1, 2008, and
September 30, 2015. During this period, 169 cumulative (70 percent) were closed
more than 2 years after resolution; 93 cumulative (39 percent) were closed more
than 5 years after resolution; and 29 cumulative (12 percent) were closed more than
7 years after resolution. In addition, adequate documentation was not maintained
for 75 out of 126 recommendations (60 percent) in the closed audits we reviewed,
including for monetary corrective actions totaling more than $8.4 million. As a
result of our findings, we determined that the Department did not have assurance
that requested corrective actions were taken and that the issues noted in the OIG
audits were corrected. Based on our findings, we made seven recommendations,
including that the Department develop and implement a process to periodically
evaluate the appropriateness of its program offices’ followup systems for external
OIG audits, to include tracking timeliness of closure. The Department agreed with
all but one of our recommendations. http://www2.ed.gov/about/offices/list/oig/
auditreports/fy2016/a19o0001.pdf

Oversight of the Development and Enhancement of
Information Technology Products
Our audit to determine whether FSA’s oversight of information technology (IT)
projects ensures that lifecycle management methodology was appropriately
implemented, found that FSA’s oversight was not sufficient.. This occurred because
no specific office or official had been designated overall responsibility to ensure the
enforcement of lifecycle management methodology for all IT projects.

FSA’s stated purpose for lifecycle management methodology is to create an
environment in which staff involved in IT project identify risks and mitigate them
early in the project lifecycle. According to its lifecycle management methodology,
FSA’s executives have important roles and responsibilities in implementing lifecycle
management methodology, as all projects with an IT component were expected to
adhere to the applicable elements and requirements of the lifecycle management
methodology. Despite this requirement in its own policy, we found that FSA did not
have an accountability mechanism and sufficient oversight of IT projects to provide
assurance that project teams appropriately implemented its lifecycle management
methodology process. Specifically, we found that FSA did not always conduct
required technical and management reviews in accordance with the lifecycle
management methodology criteria, did not always update project tailoring plans
as projects progressed through their lifecycle, and did not maintain a complete and
reliable inventory of IT projects and did not track the progress of all IT projects in its
Enterprise Project Portfolio Management system. By not having an accountability
mechanism, FSA increases the likelihood of unnecessary risk and costly delays. To
address the issues identified, we recommended five specific actions FSA should take,
including that it establish accountability mechanisms, such as assigning a specific
office or official to ensure FSA follows lifecycle management methodology for all
40  Office of Inspector General Semiannual Report




IT projects, and that it conduct an inventory of IT projects across FSA to establish
a complete universe of projects. FSA did not explicitly agree with our finding but
proposed actions to address all of our recommendations. http://www2.ed.gov/
about/offices/list/oig/auditreports/fy2016/a04o0014.pdf

Cybersecurity Act Report
As required by the Cybersecurity Act of 2015, the OIG reported to Congress on the
Department’s logical access controls, information security management practices,
and policies and procedures it employs to ensure the security of its systems that
provide access to personally identifiable information. The OIG report provided
Congress with the following.

    •	   Information that showed that although the Department established
         logical access policies and procedures consistent with Federal government
         standards, it does not always follow those standards.

    •	   A description and list of the logical access control and multifactor
         authentication the Department uses to govern access to its systems.

    •	   A description of the information security management practices the
         Department uses, including (1) inventories of software and software licenses
         and (2) capabilities to monitor and detect data exfiltration and other
         threats, including data loss prevention capabilities, forensic and visibility
         capabilities, and digital rights management capabilities.

    •	   A description of the policies and procedures the Department uses to ensure
         that entities that provide services to the Department, including contractors,
         are implementing established information security management practices.

In compiling the requested information for the report, the OIG relied on information
collected in its work in this area, including recent Federal Information Security
Modernization Act audits.


Investigations
The following is a summary of an OIG investigation related to our fourth goal.

Information Technology Companies Agree to $5.8 Million
Settlement
En Pointe Gov, En Pointe Technologies, En Pointe Technologies Sales, Dominguez
East Holdings, and Din Global Corporation agreed to pay more than $5.8 million to
settle claims that they violated the False Claims Act. The settlement is a result of a
multiagency investigation that found that from 2010 through 2014, the companies
falsely certified that En Pointe Gov—a Federal Government contractor to whom the
Department awarded more than $2.1 million for IT services—qualified as a small
business in order to obtain contracts set aside for small businesses. En Pointe Gov
also substantially underreported its General Services Administration schedule sales
to the General Services Administration to reduce the amount of industrial funding
fees it was required to pay.
                           Office of Inspector General Semiannual Report  41




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
The Office of Management and Budget’s “Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards” requires entities such
as State and local governments, universities, and nonprofit organizations that spend
$750,000 or more in Federal funds in one year to obtain an audit, referred to as a
“single audit” (through 2014, the threshold to trigger a single audit was $500,000
or more of Federal expenditures). 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. The Council of Inspectors General on Integrity and
Efficiency (CIGIE) issues guidance regarding the classification of quality control
review results. CIGIE’s classifications of quality control review results are as follows.

    •	   Pass—audit documentation contains no quality deficiencies or only minor
         quality deficiencies that do not require corrective action for the audit under
         review or future audits.

    •	   Pass with Deficiencies—audit documentation contains quality deficiencies
         that should be brought to the attention of the auditor (and auditee, as
         appropriate) for correction in future audits.

    •	   Fail—audit documentation contains quality deficiencies that affect the
         reliability of the audit results or audit documentation does not support
         the opinions contained in the audit report and require correction for the
         audit under review.

During this reporting period, we completed 24 quality control reviews of engagements
conducted by 23 independent public auditors or offices of firms with multiple
offices. We concluded that 7 (29 percent) were Pass, 4 (17 percent) were Pass with
Deficiencies, and 13 (54 percent) were Fail. In addition, we referred one independent
public auditor to the American Institute of Certified Public Accountants and the
independent public auditor’s State Board of Accountancy for possible disciplinary
actions. We made this referral due to the independent public auditor’s unacceptable
work.
42  Office of Inspector General Semiannual Report




Noteworthy News
New Policy Authorizes Full and Timely Access to Contractor
Systems
The OIG conducts audits, inspections, and other reviews related to the protection of
privacy and the safeguarding of Department IT systems, which are often provided
or supported by contractors. In performing this work, the OIG has encountered
obstacles to full and timely access to contractor-provided IT systems. Based on
feedback from the OIG, the Department initiated a process that led to the issuance
of a class deviation from standard Federal Acquisition Regulation provisions to
reflect the Department’s policy of ensuring access to contractor-provided IT
systems. The class deviation authorizes the Department to incorporate an access
clause into all solicitations and contracts for IT. The clause requires contractors and
subcontractors at all tiers to provide the Department, other Federal agencies, and
the U.S. Comptroller General full and timely access to contractor information systems
and related resources to perform privacy and information security investigations,
audits, and other reviews. This access clause will better ensure the OIG has full and
timely access to contractor and subcontractor IT systems as needed for security
reviews and investigations of cyber incidents. The class deviation will remain in
effect until the audit access clause is incorporated into the Federal Acquisition
Regulation or the Education Department Acquisition Regulations.
                                                       Office of Inspector General Semiannual Report  43




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 that provides oversight of the Department’s assessment of internal controls and related
         reports. The team also 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. 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.
44  Office of Inspector General Semiannual Report




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, vice chair of the Southwestern Forum, and
         officers of the Southeastern Forum, the Southwestern Forum, and the New York/New Jersey Forum.

    •	   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.

Reviews of Legislation, Regulations, Directives, and Memorandum
    •	   S. 2972, the Grant Reform and New Transparency Act of 2016. The OIG provided comments to
         CIGIE and to the Office of Management and Budget noting that regulations should not mandate that
         peer reviewers review grant applications to find conflicts of interest. Our comments were based on
         our prior reviews of the same that had no findings; such reviews should be up to individual offices of
         inspectors general if they consider this an area of risk in their agency.

    •	   Inspector General Mandates. The OIG provided comments to the U.S. House of Representatives
         Committee on Government Oversight on statutorily mandated reports or work that Inspectors General
         perform that can be eliminated or modified to better make use of IG resources. We identified two statutes
         that could be modified: IPERA and the Office of National Drug Control Policy Reauthorization Act of
         1998. IPERA requires IGs to submit an annual report determining whether their respective agencies
         are in compliance with IPERA. We recommended that the IG’s review should be more substantive
         and useful by (1) examining whether the agency’s methodology for its improper payment estimate
         is appropriate and consistent (not changing from year to year), (2) determining whether the agency
         is meeting reduction targets, and (3) conducting a root cause analysis regarding improper payments
         and agency failure to meet reduction targets. In addition, we recommend that the IG report be every
         3 years rather than annually to provide the agency more time to devise an appropriate methodology
         and carry out its improper payment reduction efforts. The Office of National Drug Control Policy
         Reauthorization Act requires IGs to annually authenticate agencies’ accounting of drug control funds.
         Rather than require an annual authentication, we recommend that IGs instead be required to conduct
         periodic risk assessments of agencies’ compliance with this statute, and provide authentication as
         needed as determined by the risk assessment.
                                             Office of Inspector General Semiannual Report  45




•	   Draft Department Handbook, Information Assurance Cybersecurity Policy. The OIG made
     technical comments.

•	   Draft Department Directive, Freedom of Information and Privacy Act Requests. The OIG made
     technical comments.

•	   Draft Department Directive, Transit Benefits Program. The OIG made technical comments.

•	   Draft Department Human Capital Policy, Reemployment Rights. The OIG made technical comments.

•	   Draft Department Human Capital Policy, Reduction in Grade and Removal Based on Performance.
     The OIG made technical comments.

•	   Draft Department Human Capital Policy, Drug-Free Workplace and Alcohol Testing Policy. The
     OIG made technical comments.
Annexes and
Required Tables
48  Office of Inspector General Semiannual Report



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 2008 (Public Law No. 110-181), which requires each Inspector General to include information in its
Semiannual Reports to Congress on final contract-related audit reports that contain significant findings.
We 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.
No peer reviews were completed during this reporting period.
                                                       Office of Inspector General Semiannual Report  49



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
OCFO		          Office of the Chief Financial Officer
OCO		           Office of Communications and Outreach
ODS		           Office of the Deputy Secretary
OESE		          Office of Elementary and Secondary Education
OPE		           Office of Postsecondary Education
Title IV		      Title IV of the Higher Education Act of 1965, as Amended
Recs		          Recommendations

Definitions
Audit Closure Memoranda/Letters. These are used to notify the audited entity of OIG’s decision to terminate
the audit without issuing an audit report.
Management Information Reports. Management information reports are used to provide the Department
with information and suggestions when a process other than an audit, attestation, or inspection is used to
develop the report. For example, OIG staff may compile information from previous OIG audits and other activities
to identify overarching issues related to a program or operational area and use a management information
report to communicate the issues and suggested actions to the Department.
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, grant, cooperative agreement, or other agreement or document governing the expenditure of funds;
(2) such cost not being supported by adequate documentation; or (3) the expenditure of funds for the intended
purpose being unnecessary or unreasonable. OIG considers that category (3) of this definition would include
other recommended recoveries of funds, such as recovery of outstanding funds or revenue earned on Federal
funds or interest due the Department.
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.
50  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

                       Uncompleted Corrective Actions                                                         1

 5(a)(3)               Significant Recommendations Described in Previous Semiannual Reports to
                       Congress on Which Corrective Action Has Not Been Completed (April 1, 2016,
                       Through September 30, 2016)

                       Matters Referred to Prosecutive Authorities                                            6
 5(a)(4)
                       Statistical Profile for FY 2016 (October 1, 2015, Through September 30, 2016)

 5(a)(5) and 6(b)(2)   Summary of Instances Where Information was Refused or Not Provided                    N/A

                       Listing of Reports                                                                     2
 5(a)(6)               Audit and Other Reports on Department Programs and Activities (April 1, 2016,
                       Through September 30, 2016)

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

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

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

                       Unresolved Reports
                       Unresolved Audit and Other Reports Issued Before April 1, 2016                        5A
 5(a)(10)
                       Summary of Audit and Other Reports Issued During the Previous Reporting
                       Period Where Management Decision Has Not Yet Been Made                                 5B

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

 5(a)(12)              Significant Management Decisions with which OIG Disagreed                             N/A

                       Unmet Intermediate Target Dates Established by the Department Under the Federal       N/A
 5(a)(13)
                       Financial Management Improvement Act of 1996
                                                             Office of Inspector General Semiannual Report  51


Table 1. Significant Recommendations Described in Previous
Semiannual Reports to Congress on Which Corrective Action Has
Not Been Completed (April 1, 2016, Through September 30, 2016)
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.


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


 FSA      Audit           Fiscal Years 2014 and 2013     11/14/14     1/29/15        1             3          7/31/17
          A17O0002        Financial Statements
                          Federal Student Aid
                          (OCFO is also designated
                          as an action official)
                          (SAR 70, page 41)

 FSA      Audit           Handling of Borrow             7/11/14      9/9/14         2             9          6/30/17
          A06M0012        Complaints Against
                          Private Collection
                          Agencies (SAR 69, page 45)

 OCFO     Audit           Fiscal Years 2014 and 2013     11/14/14     2/26/15        2             2          9/30/17
          A17O0001        Financial Statements U.S.
                          Department of Education
                          (FSA is also designated as
                          an action official) (SAR 70,
                          page 41)

 OSERS    Audit           Payback Provisions of          4/25/14      6/3/14         2             13        12/30/16
          A19M0004        the Rehabilitation Long-
                          Term Training Program
                          (SAR 69, page 46)
52  Office of Inspector General Semiannual Report


Table 2. Audit and Other Reports on Department Programs and
Activities (April 1, 2016, Through September 30, 2016)
Section 5(a)(6) of the IG Act, as amended, requires a listing of each report completed by OIG during the reporting period.

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

 FSA      Audit          Closure of OIG Audit of Federal Student     4/28/16          -               -             -
          Closure        Aid’s Monitoring and Enforcement of
          Letter         Compliance with the Misrepresentation
          A03P0005       Regulations

 FSA      Audit          FSA Oversight of the Development and        6/30/16          -               -            5
          A04O0014       Enhancement of Information Technology
                         Products

 FSA      Management     Misuse of FSA ID and the Personal           9/26/16          -               -            6
          Information    Authentication Service
          Report
          X21Q0001

 IES      Audit          Protection of Personally Identifiable       7/12/16          -               -            3
          A02P0006       Information in the Commonwealth of
                         Virginia’s Longitudinal Data System

 IES      Audit          Protection of Personally Identifiable       9/27/16          -               -            3
          A02P0007       Information in Oregon’s Statewide
                         Longitudinal Data System

 OCFO     Audit          U.S. Department of Education’s              5/10/16          -               -            9
          A03Q0001       Compliance With Improper Payment
                         Reporting Requirements for Fiscal Year
                         2015 (FSA is also designated as an action
                         official)

 OCFO     Audit          North Carolina Department of Public         8/26/16          -               -            4
          A09P0005       Instruction’s Oversight of Local
                         Educational Agency Single Audit
                         Resolution

 OCFO     Audit          Audit of the Department’s Followup          7/1/16           -               -            7
          A19O0001       Process for External Audits

 ODS      Audit          Nationwide Assessment of Charter and        9/29/16          -               -            5
          A02M0012       Education Management Organizations

 OESE     Audit          Audit of the Department’s Oversight of      9/12/16          -               -            10
          A19P0006       the Rural Education Achievement Program
                         (OCO is also designated as an action
                         official)

 OPE      Audit          The Western Association of Schools and      8/2/16           -               -            6
          A05P0013       Colleges Senior College and University
                         Commission Could Improve Its Evaluation
                         of Competency-Based Education
                         Programs to Help the Department Ensure
                         Programs Are Properly Classified for
                         Title IV Purposes

 Total                                                                                -               -            58
                                                          Office of Inspector General Semiannual Report  53


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 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        Unsupported Costs
                                                                       Costs)

 A. For which no management decision has been         9             $45,736,535                  $156,287
     made before the commencement of the
     reporting period

 B. Which were issued during the reporting period     0                 $0                          $0
       Subtotals (A + B)                              9             $45,736,535                  $156,287

 C. For which a management decision was made
     during the reporting period                      3             $44,205,299                   $34,976
       (i) Dollar value of disallowed costs                         $44,205,299                   $34,976
       (ii) Dollar value of costs not disallowed                        $0                          $0

 D. For which no management decision was made         6              $1,531,236                  $121,311
     by the end of the reporting period
54  Office of Inspector General Semiannual Report


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 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 was made before the commencement         0                     $0
     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:
       Dollar value of recommendations that management agreed to              0                     $0
       Dollar value of recommendations that management did not agreed to      0                     $0


 D. For which no management decision has been made by the end of the          0                     $0
    reporting period
                                                            Office of Inspector General Semiannual Report  55


Table 5A. Unresolved Audit Reports Issued Before April 1, 2016
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 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.

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

 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 is currently working with
                             us to resolve this audit.

 FSA          Audit          Ashford University’s Administration of the Title   1/21/11    $29,036          13
              A05I0014       IV HEA Programs (SAR 62, page 24)
                             Current Status: FSA is currently working with
                             us to resolve this audit.

 FSA          Audit          Metropolitan Community College’s                   5/15/12    $232,918         22
              A07K0003       Administration of Title IV Programs
                             (SAR 65, page 40)
                             Current Status: FSA is currently working to
                             resolve this audit.

 FSA          Audit          Colorado Technical University’s Administration     9/21/12    $173,164         8
              A09K0008       of Title IV Programs (SAR 65, page 40)
                             Current Status: FSA is currently working to
                             resolve this audit.

 OCFO         Audit          Massachusetts Department of Elementary             1/25/16       -             5
              A09P0001       and Secondary Education’s Oversight of Local
              New            Educational Agency Single Audit Resolution
                             (SAR 72, page 56)
                             Current Status: OCFO did not provide us any
                             information during this reporting period.

 OCFO         Audit          The Tennessee Department of Education’s            3/30/16    $242,816         11
              A05O0004       Administration of a Race to the Top Grant
              New            (SAR 72, page 57)
                             Current Status: OCFO did not provide us any
                             information during this reporting period.


 OESE         Audit          State and District Monitoring of School            3/17/16    $263,410         10
              A09O0009       Improvement Grant Contractors in California
              New            (SAR 72, page 57)
                             Current Status: OESE informed us that the
                             audit is in process for resolution.


 Total	                                                                                   $1,531,236        78
56  Office of Inspector General Semiannual Report


Table 5B. Summaries of Audit and Other 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 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, Number,
       Office                                                         Summary and Current Status
                        and Date Issued

OCFO                Massachusetts Department    Our audit found that the Massachusetts Department of Elementary and
                    of Elementary and           Secondary Education’s (Massachusetts) oversight of local education agency
                    Secondary Education’s       (LEA) single audit resolution was not sufficient. Specifically Massachusetts
                    Oversight of Local          (1) did not always work collaboratively or communicate effectively with
                    Educational Agency Single   LEAs that had audit findings to ensure that the LEAs took timely and
                    Audit Resolution (SAR 72,   appropriate corrective action. (2) did not have internal controls that were
                    page 56)                    sufficient to ensure that it provided adequate oversight of the LEA audit
                                                resolution process, and (3) did not appear to make LEA audit resolution a
                    Audit A09P0001
                                                high priority, as only one staff person worked on audit resolution activities
                    1/25/2016                   and only on a part-time basis. Because of weaknesses in its oversight of LEA
                                                single audit resolution, Massachusetts did not always identify and require
                                                LEAs to implement appropriate corrective actions, sometimes resulting
                                                in lengthy delays in LEAs implementing necessary corrective actions that
                                                would correct past deficiencies. Further, repeat audit findings may have
                                                occurred unnecessarily and Federal funds may not have been collected and
                                                remitted back to the U.S. Treasury. We made a number of recommendations
                                                to address the issues identified. Massachusetts acknowledged
                                                shortcomings in its oversight of LEA single audit resolution but disagreed
                                                with some parts of our finding and stated that it would review of our
                                                recommendations and make improvements to its processes as warranted.
                                                Current Status: OCFO did not provide us any information during this
                                                reporting period.

OCFO                The Tennessee               The audit found that, for the specific areas reviewed, the Tennessee
                    Department of Education’s   Department of Education (Tennessee) generally administered its Race to
                    Administration of a Race    the Top grant in accordance with program requirements and its approved
                    to the Top Grant (SAR 72,   grant application. We did, however, determine that Tennessee did not
                    page 57)                    ensure that one of the two LEAs included in our review developed and
                                                implemented fiscal control and fund accounting procedures that provided
                    Audit A05O0004
                                                reasonable assurance that the LEA accounted for and spent Race to the Top
                    3/30/2016                   funds in accordance with Federal requirements and the approved grant
                                                application. By not designing and implementing effective fiscal control
                                                and fund accounting procedures, the LEA increased the risk that it would
                                                misuse Federal funds or not accomplish the goals set forth in the approved
                                                Race to the Top grant application. In addition, we found that Tennessee
                                                and the LEA did not spend Race to the Top funds only on allowable items
                                                and activities and in accordance with program requirements and the
                                                approved grant application. We made 11 recommendations to address
                                                the weaknesses identified, 8 of which were specific to improving internal
                                                control activities at the LEA. Tennessee agreed with our findings and
                                                generally agreed with the recommendations.
                                                Current Status: OCFO did not provide us any information during this
                                                reporting period.
                                                     Office of Inspector General Semiannual Report  57




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

OESE            State and District          The audit evaluated the adequacy of California’s monitoring of three LEA
                Monitoring of School        activities in three key areas, whether the LEAs adequately monitored
                Improvement Grant           School Improvement Grant contractors’ performance, and whether
                Contractors in California   the LEAs had appropriate fiscal controls to ensure that payments to
                (SAR 72, page 57)           SIG contractors for professional services met Federal requirements. We
                                            found that California and the three LEAs did not adequately monitor SIG
                Audit A09O0009
                                            contractors. We also
                3/17/2016
                                            found that one LEA approved two SIG contracts that included unallowable
                                            activities, and another LEA did not appear to routinely pay SIG contractors
                                            timely. We made a number of recommendations to address the issues
                                            identified. . California did not explicitly agree with our findings but agreed
                                            with all of our recommendations.
                                            Current Status: OESE informed us the audit is in process for resolution.
58  Office of Inspector General Semiannual Report


Table 6. Statistical Profile for FY 2016 (October 1, 2015, Through
September 30, 2016)
                                                            October 1, 2015–     April 1, 2016–
                        Accomplishment                                                              FY 2016 Total
                                                             March 31, 2016    September 30, 2016

 Audit Reports Issued                                                   16                   9                25

 Inspection Reports Issued                                               0                   0                 0

 Questioned Costs (Including Unsupported Costs)                  $506,226                  $0           $506,226

 Recommendations for Better Use of Funds                                $0                 $0                 $0

 Other Products Issued                                                   1                   2                 3

 Reports Resolved By Program Managers                                   13                  11                24

 Questioned Costs (Including Unsupported Costs) Sustained       $3,916,931         $44,205,299       $48,122,230

 Unsupported Costs Sustained                                            $0             $34,976           $34,976

 Additional Disallowances Identified by Program Managers        $1,395,416          $2,415,607         $3,811,023

 Management Commitment to the Better Use of Funds                       $0                 $0                 $0

 Investigative Cases Opened                                             31                 29                 60

 Investigative Cases Closed                                             48                 35                 83

 Cases Active at the End of the Reporting Period                       259                253                253

 Prosecutorial Decisions Accepted                                       34                  24                58

 Prosecutorial Decisions Declined                                       44                  47                91

 Indictments/Informations                                               54                 43                 97

 Convictions/Pleas                                                      42                 49                 91

 Fines Ordered                                                     $10,500             $32,249           $42,749

 Restitution Payments Ordered                                   $7,269,439          $3,285,667       $10,555,106

 Civil Settlements/Judgments (number)                                    8                   9                17

 Civil Settlements/Judgments (amount)                          $110,117,153        $16,666,391      $126,783,544

 Recoveries                                                       $64,492             $231,176          $295,668

 Forfeitures/Seizures                                              $19,500          $4,126,982        $4,146,482

 Estimated Savings                                             $68,220,915          $3,251,871       $71,472,786

 Suspensions Referred to Department                                     32                  31                63

 Debarments Referred to Department                                       4                   5                 9

 Debarments Imposed by OIG                                               0                   0                 0
                  Office of Inspector General Semiannual Report  59


Acronyms and Abbreviations

CIGIE			         Council of Inspectors General on Integrity and Efficiency

Department		     U.S. Department of Education

Direct Loan		    William D. Ford Federal Direct Loan Program

FSA			           Federal Student Aid

FY			Fiscal Year

IPERA			         Improper Payments Elimination and Recovery Act of 2010

ISIS			          Islamic State in Iraq and Syria

IT			Information Technology

LEA			           Local Educational Agency

OIG			           Office of Inspector General

Recovery Act		   American Recovery and Reinvestment Act of 2009

SEA			           State Educational Agency

SLDS			          Statewide Longitudinal Data System

SSRP			          School Support and Rural Programs
60  Office of Inspector General Semiannual Report
FY 2017 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 2017.

   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 2017 Management Challenges report, visit our Web site at
http://www2.ed.gov/about/offices/list/oig/managementchallenges.html.
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 toll-free or write the Office of Inspector General.

        Inspector General Hotline
        1-800-MISUSED
        (1-800-647-8733)

        Inspector General Hotline
        U.S. Department of Education
        Office of Inspector General
        400 Maryland Ave., S.W.
        Washington, D.C. 20202

You may make a 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