Table Of ContentDOCUMENT RESUME
EA 027 650
ED 395 398
.
U.S. Department of Education, Office of Inspector
TITLE
General. Semiannual Report to Congress, No. 32.
March 31, 1996.
October 1, 1995
Office of Inspector General (ED), Washington, DC.
INSTITUTION
PUB DATE
96
NOTE
67p.
Descriptive (141)
Reports
Statistical Data (110)
PUB TYPE
MF01/PC03 Plus Postage.
EDRS PRICE
Accountability; *Compliance (Legal); *Educational
DESCRIPTORS
Finance; Elementary Secondary Education; Federal
Government; Federal Legislation; Federal Regulation;
*Financial Audits; Financial Policy; Higher
Education; Loan Repayment; *Money Management;
Resource Allocation; *Student Loan Programs
ABSTRACT
This document contains a semiannual report on the
activities of the Department of Education's Office of Inspector
General (OIG) for the 6-month period ending March 31, 1996. It
highlights the Office's significant accomplishments and activities,
including: (1) a series of audit reports to aid reauthorization of
(2) cooperation with other Education
the Rehabilitation Act;
Department offices to reauthorize the Elementary and Secondary
(4) other
(3) cooperative audit resolutions;
Education Act;
cooperative efforts with the audit and education communities; (5)
audit quality issues: settlement in nonfederal audit suit;
(6)
examples of OIG effectiveness in postsecondary education; (7)
(8) asset forfeiture; and (9) initiatives
financial statement audits;
conducted at Congressional request. Three abstracts highlight
significant audits and audit-related activities, significant
prosecutive actions resulting from OIG investigations, and
initiatives conducted in response to Congressional requests. A table
lists P.L. 95-452 reporting requirements. A glossary of abbreviations
and the following six statistical tabled are included: (1)
recommendations described in previous "Semiannual Reports" on which
(2) Department of Education
corrective action has not been completed;
(ED)/OIG reports on education department programs and activities
(3) Inspector General issued
(October 1, 1995-March 31, 1996);
(4) Inspector General issued reports
reports with questioned costs;
(5) Unresolved reports
with recommendations for better use of funds;
issues prior to October 1, 1995; and (6) Statistical summary, October
1, 1995-March 31, 1996). (LMI)
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U S DEPARTMENT OF EDUCATION
Office of Educalfo"., Resurch and Improvement
WRCES INFORMATION
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41,11,474,
OF EDUCATION
U.S. DEPARTMENT
GENERAL
OFFICE OF INSPECTOR
CULTURE STATEMENT
of the Office of Inspector General ts to
MISSION STATEMENT1 The mission
of
effective use of taxpayer dollars in support
promote the efficient and
American education.
most important asset. The
PEOPLE: We believe that our people are our
and
individual must prevail in our beliefs
importance of the dignity of the
be ever sensittve that our own dignity
behavior toward one another. We must
toward each other and the public.
is reflected in our behavior
that will capttaltze on the
CREATIVITY: We Intend to foster an environment
employees. We encourage teamwork,
talents and capabilities of all OIG
and open expression of tdeas.
innovation, creativity, and the free
and encourage
COMMUNICATION: We support open lines of communication
interaction among all levels of the
01G.
employees with a clear
ACCOUNTABILITY: We beltive in providing
and with the guidance needed
understanding of what is expected of them
Individual ts responsible for her/hts actions.
to perform these jobs. Each
work is fairly evaluated and
Managers are responsible for assuring
appropriately recognized.
must adhere
PROFESSIONALISM/ETHICS: We believe our organtzation
climate
and standards of ethics and maintain a
to professional standards
In actions, and independence
whtch fosters excellence in product. integrity
and objectivity in outlook.
growth and vision are
FORWARD THINKING: We acknowledge that
01G. We must learnfrorn
indispensable to the continuity and success of the
for the future. TheOlG
the past and present how to anticipate and prepare
to adapt to our changing
is commttted to taking the actions necessary
environment.
JULY 1988
BEST COPY AVAILABLE
U.S. Department of Education
Office of Inspector General
Semiannual Report
to Congress
No. 32
October 1, 1995 - March 31, 1996
TAT
TA.T
UNITED STATES DEPARTMENT OF EDUCATION
OFFICE OF INSPECTOR GENERAL
THE INSPECTOR GENERAL
April 30, 1996
Honorable Richard W. Riley
Secretary of Education
Washington, DC 20202
Dear Mr. Secretary:
I am pleased to submit this Semiannual Report on the activities of the Department's Office of
Inspector General (01G) for the six-month period ending March 31, 1996. Submission of this
report is in accordance with section 5 of the Inspector General Act of 1978 (Public Law 95-452,
as amended). The Act requires that you transmit this report, along with any comments you may
wish to make, to the appropriate Congressional committees and subcommittees.
When I became this Department's Inspector General in January, I was deeply impressed by the
that faced both the Depart-
fiscal, operational and programmatic
extraordinary challenges
In the months that followed, I was to be equally impressed
ment and the Office I was to lead.
by the skill, dedication and professional integrity of OIG staff, and by the willingness of
Department managers to work cooperatively with us to ensure the efficiency and effectiveness
of the Department's operations and programs.
The last several nwnths have indeed been challenging ones for this Department and for the Office
of Inspector General, but as we transmit this report, there are hopeful indications of better times
I look forward to continued progress on the critical issues that have been identified
ahead.
during this and prior periods, as together we work to achieve our mutually reinforcing goals of
educational excellence and equality of educational opportunity for the nation's learners, and pro-
gram efficiency, effectiveness and integrity for the nation's learners and taxpayers.
Sincerely,
Thomas R. Bloom
J
400 MARYLAND AVE., S.W. WASHINGTON, D C. 20202 -1516
Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation..
CONTENTS
Inspector General's Message to Congress
Executive Summary
1
P.L. 95-452 Reporting Requirements
7
Significant Audits and Audit-related Activities
8
ABSTRACT 1:
.
Significant Prosecutive Actions Resulting
ABSTRACT 2:
from OIG Investigations
17
Initiatives Conducted in Response to
ABSTRACT 3:
29
Congressional Requests
Statistical Tables
Recommendations Described in Previous Semkinnual Reports on Which
Corrective Action Has Not Been Completed
31
33
ED/OIG Reports on Education Department Programs and Activities
35
Inspector General Issued Reports with Questioned Costs
Inspector General Issued Reports with Recommendations for
36
Better Use of Funds
37
Unresolved Reports Issued Prior to October 1, 1995
40
Statistical Summary
41
Glossary of Abbreviations
6
Inspector General's
Message to Congress
Meeting the Challenge
of the Budget Crisis
In our last Semiannual Report, the Acting Inspector General set forth this Office's concerns
regarding the precarious fiscal constraints that threatened the viability of some of its most
critical operations and functions. During this six-month reporting period, some of those con-
period of en-
cerns have materialized, and the impactexacerbated by the nearly month-long
forced inactivity caused by the furlough situation at the end of calendar year I995is being
felt throughout the organization.
The challenge we face is to render the same or increased levels of service fighting fraud, waste
and abuse with significantly fewer resources. During the period, we operated under a continu-
ing budget resolution that was 7% percent below our fiscal year (FY) 1995 funding level,
which did not include $1.96 million for law enforcement availability pay and the annual audit
of Department-wide financial statements. Thus, we operated under an effective cut of 14 per-
In addition, over the last 3 years we have sustained personnel losses representing 16
cent.
percent of our staff, from 369 in 1993 to 310 at present.
In many instances
Our efforts to succeed in this difficult enterprise have already begun.
thanks to the dedication, skill and r :ofessionalism, not to mention ingenuity and resolve, of
OIG staff, and the cooperation of Department managersthese efforts have already begun to
show excellent results, as described in the pages that follow.
We shall continue to make every possible effort to meet the statutory mandates and regulatory
requirements for which we are responsible. But competence, creativity and commitment, while
admirable and even essential, cannot ultimately be expected to compensate for inadequate
If these are reduced below the proposed funding level for FY 1997, some of the
resources.
most critical work efforts and work products of this Office may have to be deferred or even
In recognition of our obligations to the nation's taxpayers and students, and our
cancelled.
commitment to the mission of the Office of Inspector General, we are determined to do all we
can to see to it that this is one challenge we will not have to meet.
I look forward to working with you and your staffs in the comidg months as we seek to
achieve a meaningful resolution to these concerns.
//./
V
Thomas R. Bloom
7
Executive Sununary:
Significant Activities and Accomplishments
COOPERATIVE INITIATIVES WITH OTHER ED OFFICES
how well States report and use program
Reauthorization of the
income to improve rehabilitation
out-
Rehabilitation Act
comes; and
As noted in our last Semiannual Report, the
whether the current allocation formula
Office of Inspector General (OIG) is currently
reflects the distribution of disabled indivi-
working on a series of audits that are designed
viduals among States.
to assist the Department (ED) and Congress in
the upcoming reauthorization of the Rehabilita-
Reauthorization of the Elementary
tion Act. These audits address issues that were
and Secondary Education Act
developed collaboratively with program offi-
cials and in consultation with Congressional
The OIG is also working with program mana-
staff during a comprehensive program survey.
gers and staff, as well as with State and local
officials, on a comprehensive survey of Ele-
The OIG plans to issue the audit reports and
mentary and Secondary Education Act (ESEA)
provide copies to the Department's reauthori-
The purpose of the survey is to
programs.
zation work groups and to Congress during the
identify issues we will audit over the next two
next reporting period. Our work has focused
years in preparation for the reauthorization of
on the following issue areas:
ESEA in 1999.
why the rate of successful case closures
varies between States;
COOPERATIVE AUDIT RESOLUTION
As noted in our last Semiannual Report, we have undertaken a wide-ranging project known as the
Cooperative Audit Resolution and Oversight Initiative (CAROL). Uncle ,. this initiative, we are work-
ing in partnership with ED program offices and States to consider alternative approaches to resolving
audits in a more efficient and effective manner and rethinking how oversight can work better to help
solve recurring problems.
The CAROI team includes staff from the Office of Elementary and Secondary Education (OESE),
Office of the Chief Financial Officer. Office of the General Counsel, and OIG. The team has part-
nered with three States (Florida, Mississippi, and Washington) to better understand the issues that
federally funded edu-
are important to State and local educational agencies in their administration of
cation programs.
The overall goal of the CA ROI is to improve education programs and student performance at State
and local levels through better use of audits, monitoring, and technical assistance. To accomplish
this goal, the team developed four strategies:
cerns, remove obstacles to improved program
Create and maintain dialogue
1)
performance, foster new cooperative methods
with States
of audit resolution, and avoid recurrence of
The objective of this strategy is to work
violations.
to address State con-
with key parties
to revise those portions of the Office
Work with States to resolve open
2)
of Management and Budget (OMB)
audits or audits under appeal
compliance supplements applicable to
The objective of this strategy is to work
programs authorized under the ESEA
with States to resolve audits from periods
to reflect flexibility in a manner con-
covered under prior legislation in a man-
sistent with new education legisla-
ner more consistent with the ESEA, the
tion.
Goals 2000: Educate America Act, and
the School-to-Work Opportunities Act.
Coordinate audits, monitoring,
4)
and technical assistance
Improve the single audit process
3)
The objective of this strategy is to im-
The objectives of this strategy are:
prove program performance through bet-
to ensure that single audits focus on
ter coordination of audits, Federal moni-
o
the most important issues and con-
toring, and Federal technical assistance,
cerns in ED programs; and
while encouraging creativity and flexibil-
ity at the State and local level.
during the reporting period are
Our activities and accomplishments under each of these strategies
Activities."
described in Abstract 1, "Significant Audits and Audit-related
EDUCATION COMMUNITIES
OTHER COOPERATIVE EFFORTS WITH THE AUDIT AND
compliance supplements is used in virtually all
Revision to single audit requirements
audits of State, local and nonprofit recipients
Because single audits are an important part of
of Federal assistance nationwide.
the Department's monitoring system, the OIG
In addition to revising sections under the Co-
has worked extensively with OMB and the
operative Audit Resolution and Oversight Ini-
General Accounting Office (GAO) in revising
tiative for programs authorized by the ESEA,
OMB guidance and Single Audit Act legisla-
this effort includes revising sections for other
This period, revisions to
tion, respectively.
ED programs; revising sections for govern-
the Single Audit Act were introduced in the
ment-wide requirements; and completely reor-
Senate, and revisions to OMB guidance have
ganizing and reformatting the document. Other
been entered into the final OMB clearance
ED programs to be updated include special
When enacted/issued,
process for issuance.
education, rehabilitative services, school-to-
the revised Act and implementing OMB gui-
work, adult and vocational education, and stu-
dance will provide for more efficient and ef-
OMB's
dent financial assistance programs.
fective audit coverage of ED programs.
goal is to have a final document by December
1996.
Revision to the OMB compliance
supplements for single audit
Revision to PCIE external quality
We are also working extensively with OMB to
control review process
revise and update its compliance supplements
The ED/OIG has the lead in a project by the
Last updated in the early
for single audit.
President's Council on Integrity and Efficiency
'90s, the supplements provide the key compli-
(PCIE) and the Federal Audit Executive Coun-
should test for and
ance requirements auditors
cil (the Assistant Inspectors General for Audit)
provide guidance on the types of testing to
the
to examine and revise, as appropriate,
perform. Revising the supplements is a major
PCIE external quality control (peer review)
government-wide effort; the guidance in the
9
2
Other cooperative initiatives
process. Offices of Inspector General are re-
quired to undergo an external quality control
This period, OIG developed with the Ameri-
review to comply with generally accepted gov-
can Institute of Certified Public Accountants a
ernment auditing standards and the Inspector
training program for independent public ac-
General Act.
countants (IPAs) who audit schools that re-
This period, a paper was prepared by an ED/
ceive funding under the Title IV student finan-
OIG-led project team with recommendations
cial assistance programs. The training will be
on certain policy issues associated with the
presented by OIG staff as a one-day strategic
peer review process.
After these recommen-
briefing on the new SFA Audit Guide in eight
dations are considered by the PCIE Audit
cities. At least 1,000 IPAs are expected to at-
Committee, the team plans to revise and up-
tend.
date the PCIE peer review guide.
AUDIT QUALITY ISSUES: SETTLEMENT IN NON-FEDERAL AUDIT SUIT
This period we began a new initiative focused on evaluating the results of non-Federal audits and ED
program reviews of institutions participating in the Title IV programs. The objective of our initiative
is to identify instances in which non-Federal audits of such institutions contain no findings while the
program reviews contain significant findings of noncompliance. These findings frequently result
in
significant liabilities for institutions.
This initiative appears very timely, considering the results of a suit filed against a non-Federal audit
firm alleging, among other things, negligence in the performance of non-Federal audits. A summary
of the results of this lawsuit is provided in Abstract 1, "Significant Audits and Audit-related Acti-
vities. "
EXAMPLES OF OIG EFFECTIVENESS IN POSTSECONDARY EDUCATION
In the student aid area, our focus continues to be on the Department's implementation of the William
D. Ford Federal Direct Loan program. This program continues to generate enormous activity by
While circumstances warrant that the Direct Loan
management and intense Congressional interest.
the Fed-
program continue to be an audit priority, we recognize the need to also focus our work on
eral Family Education Loan (FFEL) program and the Pell Grant program, both large-dollar student
financial assistance programs susceptible to fraud, waste and abuse due to poor program design and
decentralized administration.
ble to us, our assessment concluded that it was
Debt collection activity
-It cost-effective to consolidate these loans.
This period we issued a series of reports on
Accordingly, we recommended that active pur-
the Department's debt collection activities
suit of additional DCS consolidations be dis-
one dealing with loan consolidations, others
continued until a study is performed. Depart-
dealing with the effectiveness and efficiency of
ment program managers, while not in total
the Office of Postsecondary Education's Debt
agreement with our report, agreed to imple-
In the
Collection Service (DCS) operations.
ment our recommendations.
loan consolidation report, we assessed the
Our series of reports asse3sing the effective-
cost-effectiveness of the Department's initia-
ness and efficiency of DCS operations show-
tive to target over 800,000 defaulted DCS bor-
ed, overall, that DCS's efforts to accomplish
rowers' loans for consolidation into the Direct
The reports
its mission were noteworthy.
Loan program. Based on information availa-
3
