U.S.

Department of Education
Office of Inspector General
Semiannual Report
to Congress
No. 45
April 1, 2002 – September 30, 2002
U.S. Department of Education
Rod Paige
Secretary
Office of Inspector General
John P. Higgins, Jr.
Acting Inspector General
Analysis & Inspection Services
Mary Mitchelson
Acting Assistant Inspector General
November 2002
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Education, Office of Inspector General, Analysis & Inspection Services, Semiannual Report to
Congress,
No. 45, Washington, DC 20202.
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U.S. Department of Education
Office of Inspector General
Semiannual Report
to Congress
No. 45
April 1 - September 30, 2002
INSPECTOR GENERAL’S
MESSAGE TO CONGRESS
We are pleased to provide this semiannual report on the accomplishments of the Office of Inspector
General (OIG), U.S. Department of Education (Department), from April 1, 2002 to September 30,
2002.
During this time, we issued 60 audit and inspection reports and memoranda and closed 104
investigations.
Our work demonstrates OIG’s strong commitment and valuable role in assisting the Department in
ensuring the integrity of its operations and improving its programs to provide the best service to the
American public. We direct our resources to critical priorities that are central to the President’s
Management Agenda, the Department’s management challenges and strategic plan, and our strategic
plan.
We developed A Practical Guide for Reviewing Government Purchase Card Programs, edited by the
Department of Commerce OIG and published and distributed by the President’s Council on Integrity
and
Efficiency. Abuse of these cards is unacceptable and compromises the public’s trust in government. Our
Guide is an effective resource for detecting and preventing this abuse. We conducted extensive work in
information technology (IT) security, a critical component of the Department’s operations, particularly
in
light of the President’s mandate to expand electronic government. We continued our robust
investigative
work in federal student aid programs which comprise more than half of the Department’s total budget.
We commented on final rulemaking pertaining to the Higher Education Act and, as we had with regard
to
the proposed regulations, we nonconcurred with provisions on incentive compensation. We testified
before Congress on the status of the Department’s financial management and on the quality of audits
submitted by entities that receive federal funds.
The Secretary has made accountability of employees, operations, and programs the primary focus at the
Department, and our work fully supports this goal. We will continue our pursuit of improved
performance and meaningful results. In the next six months, we will focus audit, inspection, and
investigative attention on financial management, IT system security and continuity, federal student aid,
and No Child Left Behind. These areas are key priorities and essential to the Department’s mission and
goals.
We look forward to working with Congress and the Secretary in making a positive difference in the
Department’s programs and operations.
John P. Higgins, Jr.
Acting Inspector General
1

ACTIVITIES AND ACCOMPLISHMENTS

The Office of Inspector General (OIG), for the period April 1, 2002 – September 30, 2002, continued
its work to improve the programs and operations of the Department of Education (Department or ED)
and to protect their integrity.
Our work assisted the Department in its efforts to meet the goals contained in The President’s
Management Agenda, the Department’s Annual Plan, 2002-2003, OIG’s Strategic Plan, 2001-2005,
the Secretary’s Blueprint for Management Excellence, and the Management Challenges of the
Department of Education, February 2002. Our significant audits, investigations, and inspections are
summarized below. Detailed information is available on our website at http://www.ed.gov/offices/
OIG.
Improved Financial Performance
Better financial management is vital to the Department’s ability to effectively and efficiently operate
and deliver programs. We completed a number of audits, investigations, and inspections in the area of
financial management, and testified before the House Subcommittee on Select Education, Committee
on Education and the Workforce, on the status of financial management at the Department.
CONTROLS OVER
PURCHASE CARDS
We conducted a follow-up audit on purchase cards to determine if the Department
implemented our previous recommendations. We found that the Department had
made some progress, but recommended that it develop on-site guidelines, conduct
on-site internal control reviews, and reassess the number of cardholders assigned to
an approving official. The Department concurred with our recommendations.
(“Audit of Purchase Cards at the U.S. Department of Education,” ED-OIG/A17-
C0002, April 9, 2002.)
Purchase card review guide goes online
We developed A Practical Guide for Reviewing Government Purchase Card
Programs to assist OIGs and others in reviewing government purchase card
programs. Our guide, produced with the Commerce Department OIG and
published by the President’s Council on Integrity and Efficiency (PCIE), is a
valuable tool in detecting and preventing fraud, waste, and abuse. The PCIE
recognized the guide with an Award for Excellence. It is available online at http://
www.ignet.gov/pande/iande.html.
2
Department employees charged in alleged scheme to misuse government-issued
credit cards
Our investigation led to the indictment and arrest of two former Department
employees who allegedly used their government credit cards to buy household
furniture and to pay contractors for work that was not performed. The Department
paid about $163,000 for claims as a result of this alleged scheme.
MONITORING
HIGH-RISK
CONTRACTS
We evaluated the Department’s process for identifying and monitoring high-risk
contracts that support educational research and improvement programs. We found
that the Department did not always ensure that the terms of these contracts were
followed, and therefore could not ensure that contract obligations were met. The
Department concurred with our recommendations and is taking corrective action.
(“Audit to Evaluate the Department of Education’s Process for Identifying and
Monitoring High-Risk Contracts that Support Office of Educational Research and
Improvement (OERI) Programs,” ED-OIG/A19-B0009, September 20, 2002.)
FINANCIAL
INTEGRITY
INVESTIGATIONS
Our investigations resulted in a number of prosecutions for fraud against
Department programs. Seven individuals, including three Department employees,
pled guilty for their roles in a wide-ranging conspiracy to defraud the Department
of over one million dollars in electronic equipment and false overtime charges.
(See Semiannual Report No. 44, page 5, “Telecommunications Case Pleas and
Conviction.”) The three Department employees no longer work for the
Department. Three indicted co-conspirators, one a Department employee on
indefinite suspension, elected to go to trial. The PCIE has recognized this
investigation with an Award for Excellence.
Our investigation of an assistant financial aid director in Knoxville, Tennessee led
to a guilty plea for mail fraud for submission of fraudulent Federal Family
Education Loan (FFEL) applications. This individual submitted loan applications
in another person’s name, used a false Social Security number, and falsely certified
loan checks through three guaranty agencies. We developed this case from
information received from an official at the Florida Office of Student Financial
Assistance during resolution of conflicts in the National Student Loan Data
System.
Another OIG investigation led to the indictment of two brothers on 29 counts of
student aid fraud, including the use of false Social Security numbers and birth
certificates to obtain federal financial aid. The brothers received approximately
$54,000 in aid.
3
Assistant United States Attorney Barbara A. Grewe receiving an award from Secretary Rod Paige and
Acting Inspector General John Higgins, Jr. for her outstanding performance on the telecommunications
fraud investigation.
Information Technology Management
Information technology (IT) is a critical component of the Department’s operations, particularly in
light of the mandate to expand electronic government contained in The President’s Management
Agenda. The Department’s more than 100 systems must be capable of ensuring the availability,
confidentiality, and integrity of the data they contain.
GOVERNMENT
INFORMATION
SECURITY AND
REFORM ACT
(GISRA)
We issued our second evaluation of the Department’s information security plans,
programs, and practices as required by GISRA. Our review identified a number of
material and significant weaknesses in technical security controls in four of the
Department’s mission-critical systems. We concluded that the Department was not
in full compliance with GISRA. The Department agreed with most of our
recommendations. (“Department of Education’s Implementation of GISRA, Year
2,” ED-OIG/A11-C0008, September 16, 2002.)
GOVERNMENT
PAPERWORK
ELIMINATION
ACT (GPEA)
Our audit of the Department’s implementation of GPEA found that it has not
developed a Department-wide GPEA strategy or designated a manager to direct
GPEA activities. The Department agreed with some of our findings and
recommendations. (“Implementation of the Government Paperwork Elimination
Act,” ED-OIG/A11-C0009, September 30, 2002.)
ENTERPRISE
ARCHITECTURE
Our audit of the Department’s enterprise architecture found that the Department
and Federal Student Aid (FSA) have made progress toward completing an
architecture, but need to complete critical elements to use IT systems across the
Department in a cost-effective and efficient way. The Department and FSA
concurred with the report’s basic findings, but disagreed with some
recommendations. (“Audit of Enterprise Architecture,” ED-OIG/A07-C0001,
September 30, 2002.)
ADVICE AND
ASSISTANCE
We shared our expertise by participating on several Department IT steering
committees and working groups in an observer and advisory capacity. OIG
4
provided observations to the Deputy Secretary, Assistant Secretary for
Management, and Chief Information Officer, and identified opportunities for
improvement in the Investment Review Board’s IT investment management
process.
UNAUTHORIZED
TRANSFER OF
FUNDS
OIG and the FBI continue to investigate the fraudulent diversion of $1.9 million in
Impact Aid funds to improper bank accounts. The owner of one of the businesses
that fraudulently received funds pled guilty. Another individual was arrested for
allegedly conspiring to receive stolen government property.
Budget and Performance Integration
Performance measures and reliable data are necessary to determine whether programs are
accomplishing their purpose. The Department relies on program data from third parties for many of its
programs, and our work continues to disclose inaccuracies in this information.
TITLE I
ACCOUNTABILITY
DATA ISSUES
We issued a joint audit report with the U.S. General Accounting Office, the Texas
State Auditor’s Office, the Pennsylvania Office of the Auditor General, and the
City of Philadelphia Office of the Controller, on Title I, Part A program
performance data. We found that many states are not complying with state
assessment requirements and that states are not ensuring that accountability data
are reliable. We recommended that the Department enhance its controls for
ensuring that states comply with statutory student assessment requirements and
that states implement reliable accountability systems. The Department generally
concurred with our findings. The PCIE has recognized this audit with an Award
for Excellence. (“A Joint Audit Report on the Status of State Student Assessment
Systems and the Quality of Title I School Accountability Data,” ED-OIG/S14-
C0001, August 31, 2002.)
INDIVIDUALS
WITH
DISABILITIES
EDUCATION ACT
(IDEA) AUDITS
We completed audits of compliance with the funding formula requirements for
IDEA in Texas, Missouri, Florida, Idaho, Rhode Island, and Tennessee. We found
that Florida, Tennessee, and Rhode Island incorrectly calculated the base that
determines how much funding they should receive. Florida and Tennessee
generally concurred with our findings. Rhode Island requested that we modify our
recommendation. (Texas: ED-OIG/A06-C0001, July 10, 2002; Missouri: ED-OIG/
A06-C0006, July 10, 2002; Florida: ED-OIG/A06-C0004, July 18, 2002; Idaho:
ED-OIG/A06-C0003, July 10, 2002; Rhode Island: ED-OIG/A06-C0002, June 27,
2002; Tennessee: ED-OIG/A06-C0005, June 25, 2002.)
FRAUD AGAINST
ELEMENTARY
AND SECONDARY
PROGRAMS
An OIG investigation led to a guilty plea by the former executive director of
National School Services of Puerto Rico for conspiring to commit extortion. Our
investigation disclosed that the individual paid over $150,000 in return for Puerto
Rico Department of Education (PRDE) contracts substantially funded with Title I
funds. The payments were made between late 1994 and April 2001, when National
School Services was awarded contracts valued at more than $26 million. Two OIG
audit reports previously cited PRDE for improper administration of Title I
contracts awarded to National School Services.
5
Another OIG investigation led to the indictment of an Oakdale School District
(Oklahoma) employee for fraudulently obtaining over $120,000 in IDEA funds
provided by the Department to the State of Oklahoma. Our investigation found
that this individual used the Department’s money to buy vehicles and gifts for
acquaintances.
Our investigation of the former comptroller of the Douglas County, Georgia,
school system led to a sentence of 45 years in prison and a fine of $10,000. We
found that this person submitted fraudulent documents to obtain money for a
fictitious company.
A joint OIG/San Jose (California) Police Department investigation led to a guilty
plea by the accountant for the Alum Rock Union Elementary School District for
embezzling over $700,000 in Department funds. This individual deposited the
money in her personal bank account.
COMPLIANCE
ACTIVITY IN
VIRGIN ISLANDS
AND PUERTO
RICO
We worked with the Department on a compliance agreement between the
Department and the Virgin Islands to address a number of problems in
administration of elementary and secondary education programs. Our audits and
work by the Department and the Department of the Interior OIG had previously
identified these deficiencies. We also worked with the Department on an extensive
corrective action plan for the Puerto Rico Department of Education. The plan
addresses high-risk conditions and deficiencies identified in our PRDE Single
Audits and extensive OIG audit and investigative work.
GUARANTY
AGENCIES
Our work involving guaranty agencies yielded significant audit and investigative
results as discussed in the following summaries.
6
Guaranty agencies’ failure to comply fully with federal and operating fund
restrictions continues to result in improper exclusions
Our audits of two guaranty agencies found that the agencies did not deposit FFEL
funds into the appropriate reserve fund as required by the Higher Education Act.
Departmental regulations provide that all earnings attributable to federal funds
while held by the guaranty agency or its agent should follow those funds.
Our audit at United Student Aid Funds, Inc. (USAF), found that USAF did not
deposit about $6,626,000 into the Federal Fund. We recommended that the
Department require USAF to transfer the $6,626,000 from its Operating Fund to
the Federal Fund, and recover $6,288,000 of this amount to make the Operating
Fund whole. USAF did not agree with our findings. (“United Student Aid Funds,
Inc.’s Administration of the Federal Family Education Loan Program Federal and
Operating Funds,” ED-OIG/A05-B0033, April 23, 2002.)
At Oregon Student Assistance Commission (OSAC), we found that OSAC
improperly excluded about $1.6 million from the fund balance when it established
the Federal Fund, and improperly deposited about $160,000 of supplemental
preclaims assistance payments into the Operating Fund instead of the Federal
Fund. OSAC did not agree with our finding regarding improper exclusion of the
$1.6 million. (“Oregon Student Assistance Commission’s Administration of the
Federal Family Education Loan Program Federal and Operating Funds,” ED-OIG/
A09-B0016, May 9, 2002.)
Investigative initiatives add value to OIG efforts with guaranty agencies
OIG investigations and presentations at guaranty agencies were important as we
continue to work with these organizations to improve their integrity and
accountability regarding Department funds and programs.
Our investigation led to 23 months incarceration and the order to pay $163,670 in
restitution for the financial aid director at Manhattan College. The official
submitted fraudulent FFEL applications, in his name and others, to guaranty
agencies from September 1998 through December 1999, claiming to be a student
and requesting over $200,000 in loan proceeds.
OIG agents presented four sessions on fraud and abuse to the financial aid
community as part of a series of workshops offered by the Department on technical
aspects of financial aid. We also participated in partnership meetings with
representatives from California State licensing agencies, guaranty agencies, and
other ED offices. We discussed closed schools, challenged schools, and
coordinating student and citizen complaints among the various agencies.
PROGRAM
ASSESSMENT
RATING TOOL
ASSISTANCE
We provided assistance and information to the Office of Management and Budget
(OMB) in connection with its review of Department programs under the Program
Assessment Rating Tool (PART) initiative. OMB is requiring agencies to have
performance data that better describe programs funded in those agencies and
requested that we review data collected from the Department for its PART
7
assessments. Our recommendations to OMB resulted in modifications to the
Department assessments.
GRADUATION
RATES FOR LESS
THAN TWO-YEAR
POSTSECONDARY
INSTITUTIONS
We completed an inspection of graduation rates for less than two-year
postsecondary schools eligible to participate in FSA programs. We found that the
Department does not have formal procedures for enforcement against institutions
that do not submit mandatory graduation rate surveys. The Department concurred
with our recommendations to develop policies and procedures to ensure consistent
enforcement of Graduation Rate Survey reporting requirements, and to initiate
administrative action against non-compliant institutions. (“Graduation Rates for
Less than Two-Year Postsecondary Institutions,” ED-OIG/I13-C0001, August 19,
2002.)
STATE AGENCY
AND
COMMUNITYBASED
ORGANIZATION
RETURN FUNDS
A joint OIG, FBI, and FEMA OIG investigation led to the California Department
of Education (CDE) agreeing to pay up to $3.3 million to settle fraud allegations.
CDE used Department grants to fund community-based organizations (CBOs) to
provide English as a Second Language and Citizenship training. CDE released
funds to organizations that it knew lacked documentation to support the CBO
claims for funds, did not have proper not-for-profit status, and had falsified student
attendance records.
This investigation also led to a consent judgment of forfeiture between the United
States and Citizens in Action Community Development Corporation (CIACDC)
for $639,166. CIACDC was started and controlled by Hermandad Mexicana
Nacional Legal Center (HMNLC), to avoid the government’s seizure of the funds.
HMNLC is a non-profit CBO that received funds from CDE to provide adult
education courses.
NONFEDERAL
AUDIT
ACTIVITIES
Participants in Department programs are required to submit annual audits
performed by independent public accountants (IPAs). In accordance with the
Inspector General Act requirement to assure that work performed by nonfederal
auditors complies with government auditing standards, we publish audit guidance
specific to Department programs to assist IPAs in performing these audits.
We published a new Foreign School Audit Guide, for use by foreign schools
enrolling U.S. students receiving loans under the FFEL program. Our new guide
will facilitate compliance by foreign schools with the audit requirements of the
Higher Education Act and Department regulations.
We also performed quality control reviews (QCRs) of audits conducted by IPAs to
assess audit quality. We performed 51 QCRs of audits conducted by 48 different
IPA firms, or offices of firms with multiple offices. We found that 67 percent were
acceptable, 23 percent were technically deficient, and 10 percent were substandard.
We also referred four IPAs to the appropriate State Boards of Accountancy and
State Societies of Certified Public Accountants for possible disciplinary action for
substandard work. Three of these IPAs were referred for work reported in a prior
semiannual report.
8
Reduction of Fraud and Error in Student Aid Programs
and Deficiencies in Financial Management
Student financial aid programs are the Department’s largest dollar value programs. These programs are
inherently risky since many recipients do not have a credit history. We made a number of
recommendations to help the Department and FSA identify and address weaknesses.
INCENTIVE
COMPENSATION
We continue to find violations of the statutory prohibition against incentive
compensation, the practice of institutions paying individuals or organizations based
on their success in enrolling students or obtaining financial aid for the school.
University of La Verne
Our audit of University of La Verne in California found that the school violated the
statutory prohibition on incentive payments by implementing a marketing
incentive plan in academic year 1999-2000. This plan established a bonus pool
based on the revenue gained from enrollments in the university’s School of
Continuing Education exceeding a base enrollment quota. We recommended that
the university return to lenders $6,528,981 in FFEL funds, and repay the
Department interest and special allowance. We also recommended that the
university return $395,730 in Pell funds to the Department. The university agreed
with our findings, but disagreed with our recommendation to return Title IV funds.
(“University of La Verne’s Compliance with the Higher Education Act’s
Prohibition on Incentive Payments Based on Success in Securing Enrollments,”
ED-OIG/A09-C0004, June 21, 2002.)
Baker University
At Baker University in Kansas, we found that the university’s contract with the
Institute for Professional Development (IPD) to provide recruiting and accounting
services included a provision to pay IPD based on the number of students enrolled
in its School of Professional and Graduate Studies. IPD in turn paid its recruiters
based on the number of students they recruited for the programs. We
recommended that Baker return to lenders and the Department $13,935,295 in Title
IV funds disbursed to students who were improperly recruited. The university did
not agree with our findings and recommendations. (“Baker University School of
Professional and Graduate Study's Administration of Title IV Federal Student Aid
Programs,” ED-OIG/A07-A0030, September 19, 2002.)
Southern Wesleyan University
Our audit at Southern Wesleyan University in South Carolina found that the
university did not comply with the statutory prohibition on incentive compensation
and did not provide the number of instructional hours required to meet the statutory
definition of an academic year. We found that the university is liable for
$19,451,123 in Title IV funds. The university disagreed with our findings and
9
recommendations. (“Audit of Commissioned Sales and Course Length at Southern
Wesleyan University,” ED-OIG/A06-A0024, September 4, 2002.)
NOTICE OF
PROPOSED
RULEMAKING
(NPRM)
We worked with the Department during negotiations on proposed rules regarding
FSA programs and provided comments on several provisions. We nonconcurred
with one provision to change the incentive compensation regulations. This
provision would allow institutions to pay third parties based on success in securing
enrollment, without limitation on the incentive nature of those payments. We do
not believe that the existing statutory ban on incentive compensation allows any
incentive payments to entities involved in recruiting based on their success in
enrolling students.
BONUSES FOR
ENROLLMENTS
Our investigation of a former employee at Miami Institute of Technology led to the
sentencing of a former admissions counselor who received a bonus or commission
based on the students she enrolled. She was sentenced to two and one-half years
probation and ordered to pay restitution of $48,825.
WEAKNESSES IN
ABILITY-TOBENEFIT
PROGRAM
The Higher Education Act requires that a student who does not have a high school
diploma or recognized equivalent must pass an independently administered abilityto-
benefit (ATB) test to be eligible to receive federal student aid. We issued three
audits on ATB issues.
Federal Student Aid’s monitoring
Our audit found that FSA does not effectively monitor Department-approved ATB
test publishers to ensure compliance with applicable laws, regulations, and the
terms of agreements with the Secretary. (“Audit of Procedures at Federal Student
Aid for Monitoring the Ability-to-Benefit Test Publishers Approved by the U.S.
Department of Education: American College Testing, The College Board, CTB/
McGraw-Hill, and Wonderlic, Inc.,” ED-OIG/A03-B0001, August 22, 2002.)
We recommended that FSA ensure that test publishers comply with requirements,
and improve its processes for identifying and reporting retest errors so institutions
have accurate and timely information when making eligibility determinations. We
also recommended that FSA either withdraw the Department’s approval of
American College Testing’s (ACT) Assessment Test or revise the agreement. FSA
agreed with our recommendations and indicated that ACT has discontinued use of
its assessment scores for ATB.
We also recommended that the Department ensure that the regulations clearly
define who is responsible for liabilities to ED regarding Title IV funds that students
receive on the basis of an improper ATB test administration. The Department
disagreed with this recommendation.
American College Testing
We found that ACT was not in compliance with its agreement with the Department
for the approved use of its Career Programs Assessment Test. We recommended
10
that FSA require ACT to strengthen its management controls and ensure that
institutions have accurate and timely information when making eligibility
determinations. We also recommended that the Department reconsider its approval
of ACT’s Assessment Test for ATB testing if ACT does not implement our
recommendations. ACT concurred with most of our recommendations, and stated
that it intends to address the issues we raised. (“Audit of American College
Testing’s Ability-to-Benefit (ATB) Policies and Procedures for Its Career
Programs Assessment Test (CPAt),” ED-OIG/A03-B0024, May 13, 2002.)
Lincoln Technical Institute
Our audit of Lincoln Technical Institute (LTI) in Pennsylvania found that between
July 1, 1997 and November 7, 2000, LTI compromised the test security of ATB
tests administered for its students. We recommended that FSA require LTI to
repay the Department and the appropriate lenders $224,345 in Title IV funds. We
also identified other weaknesses in the school’s ATB testing process. LTI
disagreed with our findings and recommendations. (“Audit of the Ability-to-
Benefit Testing Process at Lincoln Technical Institute, Inc.,” ED-OIG/A03-B001,
May 10, 2002.)
OIG investigates ATB scams
An OIG investigation led to a guilty plea by a former Indiana beauty school owner
for student aid fraud and money laundering. The resulting sentence included 15
months incarceration, two years supervised release after incarceration, and an order
to pay the Department $1,091,101. This individual enrolled students in an
ineligible program and enrolled students without high school diplomas or GED
certificates, or without taking an ability-to-benefit test. One other person was
previously sentenced and another awaits sentencing.
FEDERAL
STUDENT AID
FRAUD
A significant portion of our investigative work is in federal student aid. Our cases
involved fraud by institution officials and by aid recipients. Institutional fraud can
be in the form of default and deferment fraud, refund fraud, and ineligible
programs receiving funds. Because of OIG investigative efforts, this period six
individuals were debarred and 17 suspended from participating in federal
programs. Examples of significant prosecutions this period follow.
Institutional fraud
An OIG investigation led to a six-year prison term and restitution order of
$11,659,499 for the leader of a fraud scheme. This person and six associates were
charged in January 1997. The leader originally fled the country but was extradited
to the United States in November 2001. The leader created a fictitious
postsecondary institution, Toldos Yakov Yosef, Brooklyn, New York, for the
purpose of collecting Pell Grants and other aid.
Another of our investigations led to a guilty plea from a former chief financial aid
officer at LeMoyne-Owen College, Memphis, Tennessee. The former aid officer
11
issued approximately $72,000 in refund checks under the names of individuals who
were never students at the school.
An OIG investigation led to 27 months incarceration and an order to pay restitution
of $1,009,190 for the former owner of Unger and Associates (UAI) for misusing
client trust funds of over $1 million. This individual was also ordered to surrender
the net proceeds, amounting to approximately $300,000, from a recent sale of real
estate. UAI contracted with ED and over 200 colleges and universities to collect
on defaulted federal student loans and tuition. Between February 1998 and June
1999, UAI used over $1 million in client trust funds for personal and operating
expenses instead of remitting them to clients.
Recipient fraud
Recipient fraud includes falsification of income, identity theft, falsification of
eligibility status, and fraudulent loan discharges. We also had several significant
cases involving preparers assisting clients in obtaining aid for which they were not
eligible.
A former Chicago schoolteacher was sentenced to two years probation, fined
$2,000, and ordered to pay restitution of $26,150 for falsifying the Free
Application for Federal Student Aid (FAFSA). Our investigation disclosed that
this person provided false income information on the FAFSA and income tax
returns, allowing her son to receive Pell Grants and other aid for which he was
ineligible.
Our joint investigation with the Social Security Administration OIG and the FBI
resulted in an Illinois couple being found guilty of financial aid fraud and Social
Security fraud. For the last 18 years, the couple committed fraud that allowed them
to receive over $18,504 in federal and state financial aid and $426,000 in Social
Security benefits.
Our investigation of a financial aid consulting service owner led to his sentencing
to 51 months incarceration, and ordered restitution of $1,585,182 to the
Department and $1,057,580 to the Illinois Student Assistance Commission. This
person prepared more than 500 fraudulent student aid applications for clients who
underreported income to make them eligible for federal and state grant funds. He
was one of 27 individuals indicted in March 2001. To date, 26 have pled guilty and
over $3 million has been recovered through civil settlements and civil fraud filings.
Our investigation led to a guilty plea by a teacher’s assistant in Chicago for federal
student aid fraud. We found that this person paid a preparer to underreport parental
income in her children’s financial aid paperwork. The false income information,
submitted to three universities from 1989 through 1999, resulted in receipt of
$23,000 in federal student aid her children were ineligible to receive.
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OIG provides vital support for terrorist investigation
OIG agents continue to support the investigation of the September 11, 2001,
attacks on the World Trade Center and the Pentagon. Our agents are performing a
number of key services, including analysis of electronic data and evaluation of
terrorist internet data. We also initiated Project Strike Back to provide
investigative and analytical support to the FBI in the nation’s terrorism
investigation.
These angels were presented to our office by an Oklahoma elementary school class to show their
appreciation and support for the volunteers who helped in the various 9/11 recovery efforts.
13
Reporting Requirements (P.L. 95-452)
Section Requirement
Table
Number
Page
Number
5(a)(1) and
5(a)(2)
Significant Problems, Abuses, and Deficiencies
Activities and Accomplishments * *
5(a)(3) Uncompleted Corrective Actions
Recommendations Described in Previous Semiannual Reports on Which
Corrective Action Has Not Been Completed
1 15
5(a)(4) Matters Referred to Prosecutive Authorities
Investigation Services Cumulative Actions 7 24
Statistical Profile 10 26
5(a)(5) and
6(b)(2)
Summary of Instances Where Information Was Refused or Not
Provided**
5(a)(6) Listing of Audit Reports
ED/OIG Audit Services Reports on Education Department Programs and
Activities
2 16
5(a)(7) Summary of Significant Audits
Activities and Accomplishments * *
5(a)(8) Audit Reports Containing Questioned Costs
Inspector General Issued Audit Reports with Questioned Costs 4 21
5(a)(9) Audit Reports Containing Recommendations That Funds Be Put
to Better Use
Inspector General Issued Audit Reports with Recommendations for Better Use of
Funds
5 21
5(a)(10) Summary of Unresolved Audit Reports Issued Prior to the
Beginning of the Reporting Period
Unresolved Reports Issued Prior to April 1, 2002 6 21
5(a)(11) Significant Revised Management Decisions**
5(a)(12) Significant Management Decisions with Which OIG
Disagreed**
* Information found on pages 1-12 of this report.
** No instances to report.
14
Management Challenges
• Correct long standing financial management problems
• Strengthen information technology security
• Improve internal controls
• Improve contract monitoring
• Balance compliance monitoring and technical assistance
• Meeting its goal of removing the federal student aid programs from the General
Accounting Office “high risk” list
• Pursue appropriate electronic government initiatives
• Improve strategic management of human capital
• Improve and test continuity of operations plans
• Improve management of IT assets
• Obtain reliable performance data and improve performance measures
15
Table 1: Recommendations Described in Previous Semiannual Reports on
Which Corrective Action Has Not Been Completed
Report
Number/
Report Title
(Prior Semiannual Report [SAR] Date
Total
Monetary
Number of
Recommendations
Latest
Target
(Date Issued) Number and Page) Resolved Findings Open Closed Date
Section 5(a)(3) of the Inspector General Act requires a listing of each report resolved before the commencement of the
reporting period
for which management has not completed corrective action. The reports listed below are OIG internal and nationwide audit
reports.
New Since Last Reporting Period
Office of the Chief Financial Officer
A17-A0002
(02/28/01)
Fiscal Year 2000 Annual Financial Statements U.S. Department
of Education (SAR 42, pp. 1, 2)
09/30/01 * 2 19 02/03/03
Federal Student Aid
A17-A0003
(02/28/01)
Fiscal Year 2000 Annual Financial Statements Student Financial
Assistance (SAR 42, pp. 1, 2)
06/30/01 * 2 16 02/03/03
Audits Reported in Previous Semiannual Reports
Office of Postsecondary Education
A04-90014
(06/30/00)
Review of Title III Program, HEA, Compliance with GPRA
Requirements for Implementation of Performance Indicators
(SAR 41, pg. 23)
03/31/01 * 6 1 12/31/02
Federal Student Aid
A01-90005
(09/29/00)
The Recertification Process for Foreign Schools Needs to Be
Improved (SAR 41, pg. 23)
03/31/01 * 1 3 10/31/02
A17-90018
(02/28/00)
Fiscal Year 1999 Annual Financial Statements Student Financial
Assistance (SAR 40, pg. 19)
09/30/00 * 1 22 12/31/02
Office of the Chief Financial Officer
A17-90019
(02/28/00)
Fiscal Year 1999 Annual Financial Statements U.S. Department
of Education (SAR 40, pg. 19)
07/31/00 * 1 23 12/31/02
Office of the Chief Information Officer
A11-90013
(02/25/00)
Review of Security Posture, Policies and Plans (SAR 40, pg. 3) 06/30/00 * 3 10 02/03/03
A11-90018
(07/10/00)
Review of EDNET Security (SAR 41, pg. 22) 03/31/01 * 2 58 12/15/02
A11-A0005
(09/14/00)
Review of Planning and Assessment Activities for Presidential
Decision Directive 63 on Critical Infrastructure Protection
(SAR 41, pg. 22)
03/31/01 * 2 8 02/03/03
Office of the Under Secretary
A17-70007
(09/24/98)
Moving Towards a Results-Oriented Organization: A Report on
the Status of ED’s Implementation of the Results Act (SAR 37,
pg. 14)
01/31/00 * ** 8 **
* Non-monetary findings only.
** Closure request was not received by the Department before reporting period ended (09/30/02).
16
Table 2: ED/OIG Audit Services Reports on Education Department Programs
and Activities (April 1, 2002 to September 30, 2002)
Report
Number Report Title
Date
Issued
Questioned
Costs**
Unsupported
Costs
Better
Use of
Funds
Number of
Recommend.
Section 5(a)(6) of the Inspector General Act requires a listing of each report completed by OIG during the reporting period.
A total of
42 audit reports were issued by ED/OIG auditors. In addition, we issued 12 alternative products, which include 3 action
memoranda,1
3 alert memoranda,2 1 information memorandum, and 5 special projects. The 42 reports, 5 special projects, and 1
information
memorandum are listed below by respective program office. The 6 action/alert memoranda, which have restricted
distribution, are not
listed.
AUDIT REPORTS
Federal Student Aid (FSA)
A03-B0001 Audit of Procedures at Federal Student Aid (FSA) for
Monitoring the Ability-to-Benefit (ATB) Test Publishers
Approved by the U.S. Department of Education (ED):
American College Testing (ACT), The College Board,
CTB/McGraw-Hill, and Wonderlic, Inc. (Wonderlic)
(OPE also designated as an action office for this report)
08/22/02 * * * 4
A03-B0013 Audit of the Ability-to-Benefit (ATB) Testing Process at
Lincoln Technical Institute, Inc. (LTI), Philadelphia, PA
05/10/02 $256,946 * * 9
A03-B0024 Audit of American College Testing’s Ability-to-Benefit
(ATB) Policies and Procedures for its Career Programs
Assessment Test (CPAt)
05/13/02 * * * 12
A04-B0015 Review of Cash Management and Student Financial
Assistance Refund Procedures at Bennett College (OPE
designated as collateral action office for this report)
09/26/02 $997,313 * * 7
A05-B0019 Audit of Course Length at Trinity Christian College
(Trinity)
09/17/02 $111,061 * * 3
A05-B0033 United Student Aid Funds, Inc.’s Administration of the
Federal Family Education Loan Program Federal and
Operating Funds
04/23/02 $6,626,000 * * 4
A05-B0037 Audit of the Administration of the Student Financial
Assistance Programs by Aakers Business College
(College) during the period October 1, 1998, through
September 30, 1999
07/23/02 $4,366 * * 4
A05-B0040 Audit of the Administration of Selected Aspects of the
Student Financial Assistance Programs by Globe College
(College) during the period January 1, 1999, through
December 31, 1999
08/07/02 $61,466 * * 3
A06-A0024 Audit of Commissioned Sales and Course Length at
Southern Wesleyan University
09/04/02 $19,451,123 * * 5
A06-B0007 University of San Francisco’s Administration of the
William D. Ford Federal Direct Loan Program
07/24/02 $201,655 $1,189,345 * 5
A06-C0019 Audit of Wade College’s (Wade) Compliance with Title IV
of the Higher Education Act of 1965 (HEA), as amended,
and selected regulations governing Federal Student
Financial Assistance (SFA) Programs during the period
July 1, 2000, through December 31, 2001
06/19/02 $3,746 * * 4
17
A07-A0030 Baker University School of Professional and Graduate
Study’s Administration of Title IV Federal Student Aid
Programs
09/19/02 $15,716,275 * * 7
A07-A0031 Fontbonne University Options Program’s Administration
of Title IV Federal Student Aid Programs
09/30/02 $12,441,490 * * 7
A07-B0002 Audit of the National Student Loan Program’s
Establishment of the Federal Family Education Loan
Program Federal and Operating Funds
09/27/02 $728,183 $1,944,758 * 10
A09-B0016 Oregon Student Assistance Commission’s Administration
of the Federal Family Education Loan Program Federal
and Operating Funds
05/09/02 $2,044,821 $1,985,628 * 10
A09-C0004 University of LaVerne’s Compliance with the Higher
Education Act’s Prohibition on Incentive Payments Based
on Success in Securing Enrollments
06/21/02 $6,924,711 * * 2
A09-C0005 Silicon Valley College’s Administration of the Higher
Education Act, Title IV Programs
09/20/02 $436 * * 6
Office of the Chief Financial Officer (OCFO)
A07-B0016 The Department’s Management Controls over
Discretionary Grants Need to be Strengthened to Ensure
Grant Accountability
09/26/02 * * * 5
A07-C0008 Contract Closeout Audit of Office of Educational
Research and Improvement Contract No. RJ96006501 at
Northwest Regional Educational Laboratory
09/12/02 $320,195 * * 4
A17-C0002 Audit of Purchase Cards at the U.S. Department of
Education
04/09/02 * * * 4
A19-B0009 Audit to Evaluate the Department of Education’s Process
for Identifying and Monitoring High-Risk Contracts that
Support Office of Educational Research and Improvement
(OERI) Programs (OERI also designated as action office
for this report)
09/20/02 $4,853 * * 20
Office of the Chief Information Officer (OCIO)
A07-C0001 Audit of Enterprise Architecture
(FSA also designated as action office for this report)
09/30/02 * * * 4
A11-C0008 The Department of Education’s Implementation of the
Government Information Security Reform Act (GISRA)
Year 23
09/16/02 * * * 26
A11-C0009 Implementation of the Government Paperwork
Elimination Act
09/30/02 * * * 2
Table 2: ED/OIG Audit Services Reports on Education Department Programs
and Activities (April 1, 2002 to September 30, 2002) (Cont.)
Report
Number Report Title
Date
Issued
Questioned
Costs**
Unsupported
Costs
Better
Use of
Funds
Number of
Recommend.
18
Office of Educational Research and Improvement (OERI)
A05-C0011 Audit of the Public Broadcasting Service’s (PBS)
Administration of the TeacherLine Grant No.
R286A000003-01 (Grant) awarded under the
Telecommunications Demonstration Project for
Mathematics for the period June 1, 2000, through May 31,
2001
09/10/02 $1,974 $147,456 * 5
A05-C0020 Audit of the Public Broadcasting Service’s (PBS)
Administration of the Ready-To-Learn Cooperative
Agreement No. R295A000002 (Agreement) awarded
under the Department of Education’s Ready-To-Learn
Television Program for the period September 1, 2000,
through August 31, 2001
09/10/02 $52 $140,664 * 4
Office of Elementary and Secondary Education (OESE)
A02-B0025 Puerto Rico Department of Education Did Not Administer
Properly Three Contracts with R.V. Research and
Management Group, Inc.
09/12/02 $371,748 $1,774,275 * 10
A03-B0023 Audit of Caroline Wilder Harris (C.W. Harris) Elementary
School’s Federal Grant Expenditures for the period July 1,
1999, through June 30, 2001
09/17/02 * $43,159 * 2
A05-B0011 Audit of the Title I, Part A, Targeted Assistance Schools
Grant (Grant) Administered by the Mount Clemens
Community Schools District (District) for the July 1,
1997, through June 30, 1998, Award Year
08/02/02 $120,760 $338,571 * 4
A05-B0038 Audit of the Michigan Department of Education’s (MDE)
Administration of Selected Federal Funds Provided to
Charter Schools for the period October 1, 1999, through
September 30, 2000
09/06/02 * * * 0
A05-C0012 Audit of East Cleveland City Schools’ (ECCS)
Administration of the 21st Century Community Learning
Centers (21st Century) Grant at Kirk Middle School (Kirk)
for the period June 1, 1998, through December 31, 2001
09/18/02 $38,678 $310,959 * 9
Office of Postsecondary Education (OPE)
A03-B0026 Audit of Delaware State University’s Administration of
the Title III Strengthening HBCU Program
07/11/02 * * * 7
A05-B0035 Audit of Robert Morris College’s Administration of the
Talent Search, Upward Bound, and Student Support
Services Programs Chicago, Illinois
09/27/02 $20,151 * * 12
A07-A0033 Audit of Gaining Early Awareness and Readiness for
Undergraduate Programs
06/07/02 * * * 8
Office of Special Education and Rehabilitative Services (OSERS)
A02-B0014 Audit of the Puerto Rico Vocational Rehabilitation
Administration (PRVRA)
06/26/02 * $15,800,000 * 5
Table 2: ED/OIG Audit Services Reports on Education Department Programs
and Activities (April 1, 2002 to September 30, 2002) (Cont.)
Report
Number Report Title
Date
Issued
Questioned
Costs**
Unsupported
Costs
Better
Use of
Funds
Number of
Recommend.
19
A06-B0028 Allowability of Office of Special Education and
Rehabilitative Services’ Grant Charges by Partners
Resource Network, Inc., Beaumont, Texas
05/23/02 $17,220 $45,500 * 5
A06-C0001 Audit of the Individuals with Disabilities Education Act
(IDEA), Part B, Section 611, at the Texas Education
Agency (Texas)
07/10/02 * * * 0
A06-C0002 Audit of the Individuals with Disabilities Education Act
(IDEA), Part B, Section 611, at the State of Rhode Island’s
Elementary and Secondary Education (Rhode Island)
06/27/02 * * * 1
A06-C0003 Audit of the Individuals with Disabilities Education Act
(IDEA), Part B, Section 611, at the Idaho State
Department of Education (Idaho)
07/10/02 * * * 0
A06-C0004 Audit of the Individuals with Disabilities Education Act
(IDEA), Part B, Section 611, at the Florida Department of
Education (Florida)
07/18/02 * * * 1
A06-C0005 Audit of the Individuals with Disabilities Education Act
(IDEA), Part B, Section 611, at the Tennessee Department
of Education (Tennessee)
06/25/02 * * * 1
A06-C0006 Audit of the Individuals with Disabilities Education Act
(IDEA), Part B, Section 611, at the Missouri Department
of Elementary and Secondary Education (Missouri)
07/10/02 * * * 0
ALTERNATE AUDIT SERVICES PRODUCTS
Office of the Chief Financial Officer (OCFO)
S17-C0010 Review of Third Party Drafts Questioned by the U.S.
General Accounting Office
09/27/02 * * * 0
Office of Elementary and Secondary Education (OESE)
S14-C0001 A Joint Audit Report on the Status of State Student
Assessment Systems and the Quality of Title I School
Accountability Data (joint effort of GAO, ED/OIG, Texas
State Auditor’s Office, Pennsylvania Department of the
Auditor General, and the Office of the City Controller,
Philadelphia)
08/31/02 * * * 6
Federal Student Aid (FSA)
E07-C0017 Colorado Student Loan Program’s Proposed Fiscal
Separation of the Loan Servicing Unit and Proposed
Buyout of Federal Non-liquid Assets (issued to FSA and
OPE as Information Memorandum FSA No. 02-01)
07/09/02 * * * 0
S07-C0024 Results of the OIG Analysis of the Consistent Answers for
Customers Share-In-Savings Proposals (special project to
assist ED with on-going negotiation efforts)3
09/30/02 * * * 15
Table 2: ED/OIG Audit Services Reports on Education Department Programs
and Activities (April 1, 2002 to September 30, 2002) (Cont.)
Report
Number Report Title
Date
Issued
Questioned
Costs**
Unsupported
Costs
Better
Use of
Funds
Number of
Recommend.
20
Office of Postsecondary Education (OPE)
A09-C0016 North Central Association of Colleges and Schools’
(NCACS) Accreditation Standards for Student
Achievement and Program Length (Management
Information Report to assist ED with its oversight over
accrediting agencies and to provide suggestions for
enhancement to NCACS)
09/26/02 * * * 0
A09-C0017 Accrediting Commission of Career Schools and Colleges
of Technology’s (ACCSCT) Accreditation Standards for
Student Achievement and Program Length (Management
Information Report to assist ED with its oversight over
accrediting agencies and to provide suggestions for
enhancement to ACCSCT)
09/27/02 * * * 0
* Non-monetary finding only. ** Includes other recommended recoveries.
A - Audit S - Special Report E - Action Memorandum
1 Action Memoranda notify the Department’s management of issues and problems detected so that appropriate action is taken. Action
Memoranda
are pre-decisional and will not appear on our website.
2 Alert Memoranda notify the Department’s management of issues and problems detected so that appropriate action is taken. An Alert
Memorandum
was used because issues and problems were identified that were outside our scope of review. Alert Memoranda are final and will appear
on our
website unless information is restricted.
3 Restricted distribution.

Table 3: Other ED/OIG Reports on Education Department Programs and

Activities (April 1, 2002 to September 30, 2002)
Report
Number Title of Report Date Issued
I13-C0025 A Practical Guide for Reviewing Government Purchase Card Programs 06/11/02
I13-C0013 OIG Review of the Department’s Physical Security Assessment Report II 06/13/02
I13-C0020 OIG Review of the OMB PART Tool and Spring Assessments 06/28/02
I13-C0012 Development of Core Competencies for OIG Analysis and Inspection Services 08/08/02
I13-C0001 Graduation Rates for Less Than Two-Year Postsecondary Institutions 08/19/02
I13-C0020 OIG Review of OMB Draft PART Assessments 09/13/02
Table 2: ED/OIG Audit Services Reports on Education Department Programs
and Activities (April 1, 2002 to September 30, 2002) (Cont.)
Report
Number Report Title
Date
Issued
Questioned
Costs**
Unsupported
Costs
Better
Use of
Funds
Number of
Recommend.
21
Table 4: Inspector General Issued Audit Reports with Questioned Costs1
Number Questioned Unsupported2
A. For which no management decision has been made before the
commencement of the reporting period (as adjusted)3
44 $122,819,629 $23,941,455
B. Which were issued during the reporting period 26 $90,064,778 $24,510,470
Subtotals (A + B) 70 $212,884,407 $48,451,925
C. For which a management decision was made during the reporting period 17 $9,304,915 $3,337,836
(i) Dollar value of disallowed costs $9,240,307 $3,337,836
(ii) Dollar value of costs not disallowed $64,608 $0
D. For which no management decision has been made by the end of the
reporting period
53 $203,579,492 $45,114,089
E. For which no management decision was made within six months of
issuance
27 $113,514,714 $20,603,619
1 None of the audits reported in this table were performed by the Defense Contract Audit Agency.
2 Included in questioned costs.
3 Beginning balance for Unsupported Costs was decreased by $100,000 (adjustment made to our database for audit A07-A0006). Also,
beginning
balance for Questioned Costs was increased by $2,214 (adjustment made to our database for audit A05-90054).
Table 5: Inspector General Issued Audit Reports with Recommendations for
Better Use of Funds
Number Dollar Value
No activity to report
Table 6: Unresolved Reports Issued Prior to April 1, 2002
Report
Number
Report Title
(Prior Semiannual [SAR] Number and Page)
Date
Issued
Total
Monetary
Findings
Number of
Recommend.
Section 5(a)(10) of the Inspector General Act requires a listing of each report issued before the commencement of the
reporting period
for which no management decisions had been made by the end of the reporting period.
New Since Last Reporting Period
Federal Student Aid
A03-A0022 Audit of Commissioned Sales and Course Length at Wesley College 01/15/02 $1,431,560 5
Status: Audit was placed on administrative stay on January 29, 2002.
A03-B0022 Audit of Wonderlic’s Ability-to-Benefit Program 02/05/02 * 4
Status: Following discussions with FSA and OPE, OPE has been designated as the action office for this audit.
A04-10008 CSX Commercial Services, Inc. (SAR 27, pg. 34) 09/17/93 $19,900,000 9
Status: This audit came off administrative stay. Program office is researching payment history.
22
A05-B0003 Audit of Commissioned Sales and Course Length at Benedictine University 12/13/01 $221,988 5
Status: Audit was placed on administrative stay on March 19, 2002.
A06-B0012 Audit of Los Angeles City College’s Compliance with the Title IV, Student
Financial Assistance, Verification Requirements
11/14/01 $14,072 3
Status: Program office is working on final audit determination.
Office of the Chief Financial Officer
A19-B0010 Audit of Controls over Government Travel Cards 03/27/02 $52,963 7
Status: Progress is being made in resolving and closing the audit.
Office of Elementary and Secondary Education
A03-B0025 Improving Title I Data Integrity for Schools Identified for Improvement 03/27/02 * 4
Status: Action items submitted to OIG on October 1, 2002.
Office of Postsecondary Education
A07-90034 Department Controls over TRIO Grantee Monitoring 01/04/02 * 9
Status:Waiting for a response from program office.
Reported in Previous Semiannual Reports
Federal Student Aid
A02-70010 Drake Business Schools Corporation - Refunds of Unearned Tuition, Fees and
Other Institutional Charges (SAR 41, pg. 23)
06/06/00 $72,493 11
Status: Audit was placed on administrative stay on March 29, 2001. Office of the General Counsel required additional
audit
work before the final audit determination can be issued.
A03-90005 Computer Dynamics Institute Incorporated’s Eligibility to Participate in the Title
IV Programs (SAR 41, pg. 23)
09/15/00 $6,410,913 6
Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report.
A05-A0030 Audit of Commissioned Sales at Olivet Nazarene University (SAR 43, pg. 11) 05/21/01 $3,299,891 4
Status: Audit was placed on administrative stay on July 26, 2001.
A05-B0004 Indiana Wesleyan University, Adult and Professional Studies Administration of
Title IV Programs, Marion, Indiana (SAR 43, pg. 11)
09/28/01 $31,682,782 5
Status: Audit was placed on administrative stay on October 24, 2001.
A05-B0014 Audit of Course Length at Olivet Nazarene University (SAR 43, pg. 12) 09/28/01 * 4
Status: Audit was placed on administrative stay on October 24, 2001.
A06-70005 Professional Judgment at Yale University (SAR 36, pg. 18) 03/13/98 $5,469 3
Status: Audit was placed on administrative stay on June 29, 2000.
A06-70009 Professional Judgment at University of Colorado (SAR 37, pg. 17) 07/17/98 $15,082 4
Status: Audit was placed on administrative stay on June 29, 2000.
A06-90010 International Aviation and Travel Academy’s Administration of Title IV Student
Financial Assistance Programs (SAR 42, pg. 22)
03/29/01 $6,637,634 7
Status: Audit was placed on administrative stay on September 24, 2001.
Table 6: Unresolved Reports Issued Prior to April 1, 2002 (Cont.)
Report
Number
Report Title
(Prior Semiannual [SAR] Number and Page)
Date
Issued
Total
Monetary
Findings
Number of
Recommend.
23
A06-A0001 Interactive Learning Systems’ Administration of the Title IV Student Financial
Assistance Programs (SAR 43, pg. 12)
07/20/01 $990,828 7
Status: This audit is currently being reviewed by FSA staff - Dallas Case Team.
A06-A0003 International Business College’s Administration of Title IV Student Financial
Assistance Programs (SAR 42, pg. 22)
03/28/01 $461,035 4
Status: FSA is working on final audit determination.
A06-A0015 ESS College of Business’ Administration of the Title IV Student Financial
Assistance Programs (SAR 43, pg. 12)
08/29/01 $4,439,651 4
Status: FSA is working on final audit determination.
A06-B0014 Audit of United Education Institute’s Compliance with the Title IV, Student
Financial Assistance, Verification Requirements (SAR 43, pg. 12)
09/28/01 $7,285 1
Status: This audit is being reviewed by the case team.
A07-23545 State of Missouri, Single Audit Two Years Ended June 30, 1991 04/01/93 $1,048,768 18
Status: This is a single audit report prepared by the State Auditor of Missouri that covered two years ending June 30, 1991.
Findings require further discussions with the General Manager, Chief Operating Officer, Office of Postsecondary
Education, and Office of the Deputy Secretary.
A07-33123 State of Missouri, Single Audit Year Ended June 30, 1992 03/07/94 $187,530 18
Status: This is a single audit report prepared by the State Auditor of Missouri that covered the year ending June 30, 1992.
Findings require further discussions with the General Manager, Chief Operating Officer, Office of Postsecondary
Education, and Office of the Deputy Secretary.
A07-90035 Audit of Commissioned Sales at William Penn University (SAR 43, pg. 12) 05/15/01 $5,023,447 4
Status: Audit was placed on administrative stay on August 1, 2001.
A07-B0001 Audit of Course Length at William Penn University (SAR 43, pg. 12) 09/28/01 * 4
Status: Audit was placed on administrative stay on October 24, 2001.
A09-70015 Associated Technical College (ATC) Eligibility of Institutions to Participate in
Title IV Programs & Other Issues (SAR 37, pg. 16)
09/09/98 $8,600,000 7
Status: FSA is working on final audit determination.
N06-90010 Inspection of Parks College’s Compliance with Student Financial Assistance
Requirements (SAR 40, pg. 18)
02/09/00 $169,390 1
Status: Discussions are in progress as to the responsible party to resolve this audit.
Office of Elementary and Secondary Education
A01-90006 Puerto Rico Department of Education Needs Major Improvements in its
Administration of the Even Start Program (SAR 41, pg. 22)
09/27/00 $181,305 18
Status: A Department team is working on the resolution of this audit.
A01-90007 Puerto Rico Department of Education Needs Major Improvements in its
Administration of the Governor’s Safe and Drug-Free School Program (SAR 41,
pg. 22)
09/27/00 $82,452 17
Status: A Department team is working on the resolution of this audit.
A01-A0004 Puerto Rico Department of Education Did Not Administer Properly a $9,700,000
Contract with National School Services of Puerto Rico (SAR 42, pg. 21)
03/28/01 $7,841,493 14
Status: A Department team is working on the resolution of this audit.
Table 6: Unresolved Reports Issued Prior to April 1, 2002 (Cont.)
Report
Number
Report Title
(Prior Semiannual [SAR] Number and Page)
Date
Issued
Total
Monetary
Findings
Number of
Recommend.
24
A02-50200 The Puerto Rico Department of Education Must Institute a Time Distribution
System (SAR 36, pg. 13)
11/14/97 * 1
Status: A Department team is working on the resolution of this audit.
A02-B0012 Puerto Rico Department of Education Did Not Administer Properly Title I
Contracts with National School Services of Puerto Rico for the 1999/2000 and
2000/2001 School Years (SAR 43, pg. 11)
09/28/01 $8,412,28 10
Status: Audit was placed on administrative stay on February 7, 2002.
Office of Postsecondary Education
A05-A0026 Audit of Richard J. Daley College’s Administration of Selected Aspects of Its
Strengthening Institutions - Hispanic Serving Institution Program, Chicago,
Illinois (SAR 42, pg. 21)
03/30/01 $1,621,861 2
Status:Waiting for a response from the program office.
Office of Special Education and Rehabilitative Services
A04-A0015 The Virgin Islands Government Lacks Adequate Management Controls Over the
Administration of Its IDEA, Part B Grant Program Salary Costs (SAR 43, pg. 11)
07/25/01 $4,702,542 15
Status: Audit was placed on administrative stay on January 15, 2002.
A04-B0013 Audit of the Virgin Islands Department of Education, Special Education Payroll
(SAR 43, pg. 11)
07/17/01 * 4
Status: Audit was placed on administrative stay on January 15, 2002.
* Non-monetary findings only.
Note - Status comments reflect documents received, comments agreed to, or comments provided by the Department.
Table 7: Investigation Services Cumulative Actions (April 1, 2002
to September 30, 2002)
Subject/Period
Indicted/
Information Convicted Sentenced Civil Matters
Adjudicated
Value
School Cases
April 1, 2002 - September 30, 2002 13 17 16 0 $1,760,811
Fiscal Year 2002 Total 30 30 38 0 $16,302,910
Federal Student Aid Recipient Cases
April 1, 2002 - September 30, 2002 44 25 28 67 $1,432,557
Fiscal Year 2002 Total 58 50 64 179 $2,847,060
Internal Employee Cases
April 1, 2002 - September 30, 2002 3 0 0 0 $0
Fiscal Year 2002 Total 3 4 1 0 $0
Table 6: Unresolved Reports Issued Prior to April 1, 2002 (Cont.)
Report
Number
Report Title
(Prior Semiannual [SAR] Number and Page)
Date
Issued
Total
Monetary
Findings
Number of
Recommend.
25
Other Cases
April 1, 2002 - September 30, 2002 3 9 7 2 $4,051,050
Fiscal Year 2002 Total 23 22 10 2 $4,075,503
Table 8: Collections from Audits
Reports Issued with Recommended
FY
Questioned/
Unsupport.
Questioned/
Unsupported
/Recomend.
Questioned/
Unsupported
Resolved
Questioned/
Unsupported
Resolved
Management
Decisions
Write-Offs
Adjustments
Collected/
Recovered Balance
The House Report (H.R. 105-635) to accompany H.R. 4274, directs the Office of Inspector General of the Department of
Education to
submit reports detailing recoveries and savings generated by its work. The following table reflects that information.
1998 11 $17,011,401 8 $8,390,850 $5,350,168 $0 $1,630,691 $3,719,477
1999 11 $69,804,793 11 $69,804,793 $38,255,609 $95,0851 $1,556,9252 $36,603,599
2000 21 $72,886,717 17 $66,142,528 $65,834,467 $48,600,0003 $2,034,6374 $15,199,830
2001 23 $82,435,089 11 $7,314,508 $7,012,608 $0 $97,375 $6,915,233
2002 37 $93,115,338 7 $1,329,927 $1,271,983 $0 $32,271 $1,239,712
Total 103 $335,253,338 54 $152,982,606 $117,724,835 $48,695,085 $5,351,899 $63,677,851
1 Total includes adjustment of $95,085 as a result of settlement agreement.
2 Total includes offset of $249,900.
3 Total includes a settlement agreement dated March 27, 2000.
4 Total includes two offsets totaling $130,165 ($90,600 + $39,565) and one deobligation for $77,959 for a total of $208,124.
Table 9: Collections from Investigations
FY
Number of
Investigations with
Penalties
Fines, Restitutions,
Settlements and
Judgments
Amount Collected
(04/01/02 - 09/30/02)
Amount Collected
(10/01/01 - 03/31/02)
Total Amount
Collected (10/01/01 -
09/30/02)
The House Report (H.R. 105-635) to accompany H.R. 4274, directs the Office of Inspector General of the Department of
Education to
submit reports detailing recoveries and savings generated by its work. The following table reflects that information.
1998 180 $48,208,055 $9,461 $31,599,932 $31,609,393
1999 274 $19,154,906 $24,060 $7,140,166 $7,164,226
2000 119 $37,311,157 $33,933 $109,681 $143,614
2001 130 $9,808,716 $92,937 $88,539 $181,476
2002 339 $29,217,458 $176,294 $290,176 $466,470
Total 1042 $143,700,292 $336,685 $39,228,494 $39,565,179
Table 7: Investigation Services Cumulative Actions (April 1, 2002
to September 30, 2002) (Cont.)
Subject/Period
Indicted/
Information Convicted Sentenced Civil Matters
Adjudicated
Value
26
Table 10: Statistical Profile (April 1, 2002 to September 30, 2002)
Six-month Period Ending
9/30/02
Fiscal Year Ending
9/30/02
OIG AUDIT REPORTS ISSUED 42 79
Questioned Costs $65,554,308 $68,356,151
Unsupported Costs $24,510,470 $24,759,1871
Recommendations for Better Use of Funds $0 $0
OTHER OIG PRODUCTS 18 41
(Inspections, Action Memoranda, Alert Memoranda, Management Information
Reports, Advisory Reports, Special Projects, and Field Pricing Reviews)
OIG AUDIT REPORTS RESOLVED BY
PROGRAM MANAGERS 37 66
Questioned Costs Sustained $5,902,471 $16,365,914
Unsupported Costs Sustained $3,337,836 $3,338,197
Additional Disallowances Identified by Program Managers $194,530 $215,060
Management Commitment to the Better Use of Funds $0 $0
INVESTIGATIVE CASE ACTIVITY
Cases Opened 115 2312
Cases Closed 104 313
Cases Active at End of Period 390 390
Prosecutorial Decisions
-Accepted 51 1093
-Declined 19 394
INVESTIGATION RESULTS
Indictments/Informations 63 117
Convictions/Pleas 51 110
Fines Ordered $30,025 $54,7755
Restitution Payments Ordered $20,994,482 $23,130,1326
Civil Settlements/Judgments (#) 67 1817
Civil Settlements/Judgments ($) $4,656,496 $6,207,7798
Savings/Recoveries $3,009,231 $3,131,335
Seized/Forfeited Property $0 $2,417,0009
1 A07-A0006 issued 10/15/01 was decreased by $100,000. 6 Includes $12,732 not reported last period.
2 Includes 3 cases not reported last period. 7 Includes 9 cases not reported last period.
3 Includes 1 case not reported last period. 8 Includes $172,203 not reported last period.
4 Includes 3 cases not reported last period. 9 Includes $2,304,896 not reported last period.
5 Includes $3,025 not reported last period.
U.S. Department of Education
Washington, D.C. 20202-1510
Official Business
Penalty for Private Use, $300
U.S. DEPARTMENT OF EDUCATION
OFFICE OF INSPECTOR GENERAL
SEMIANNUAL REPORT TO CONGRESS