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ED 479 292 TITLE INSTITUTION REPORT NO PUB DATE NOTE AVAILABLE FROM PUB TYPE EDRS PRICE DESCRIPTORS IDENTIFIERS ABSTRACT DOCUMENT RESUME EA 032 674 Semiannual Report to Congress, October 1, 2002-March 31, 2003. Office of Inspector General (ED), Washington, DC. No-46 2003-05-00 35p. ED Pubs, P.O. Box 1398, Jessup, MD 20794-1398 (Publication ID# EF 0037C). Tel: 877-433-7827 (Toll Free); TDD/TTY: 800- 437 -0833 (Toll Free); Fax: 301-470-1244; e-mail: edpubs@inet.ed.gov; Web site: http://www.ed.gov/pubs/edpubs.html. For full text: http://www.ed.gov/offices/ OIG/semiann/sar46.pdf. Legal/Legislative/Regulatory Materials (090) Reports Descriptive (141) EDRS Price MF01/PCO2 Plus Postage. Academic Standards; *Accountability; *Audits (Verification); *Compliance (Legal); Elementary Secondary Education; Federal Aid; *Federal Government; *Financial Audits; Financial Policy; Fraud; Government Publications; Government Role; Program ,Effectiveness; Public Sector; Quality Control *Department of Education This semiannual report to Congress by the Office of Inspector General (OIG), U.S. Department of Education, covers the actions of the OIG from October 1, 2002, through March 31, 2003. The report discusses four goals of the President's Management Agenda: (1) improved financial performance: includes information on financial statement audits, testimony on financial management, and financial integrity investigations; (2) budget and performance integration: includes information on compliance with IDEA funding requirements, migrant education, continued noncompliance by high-risk Pacific outlying-areas grantees, controls over equipment in the Virgin Islands, and investigations into fraud in elementary and secondary programs'; (3) expanded electronic government: includes information on hacking investigations and an audit of the department's Critical Infrastructure Protection program; and (4) elimination of fraud and error in student-aid programs: includes information on investigations of fraud in student financial-assistance programs by school officials, consultants, and students. The report also discusses security efforts of the Department of Education and nonfederal financial audits of department programs. The report contains eight detailed tables on programs, activities, investigations, and other information. (WFA) Reproductions supplied by EDRS are the best that can be made from the original document. wl Ir N 01 C71 wr- .1 N 4 i II 111 ip 11...G U.S. DEPARTMENT OF EDUCATION Office of Educational Research and Improvement DUCATIONAL RESOURCES INFORMATION CENTER (ERIC) This document has been reproduced as received from the person or organization originating it. Minor changes have been made to improve reproduction quality. Points of view or opinions stated in this document do not necessarily represent official OERI position or policy. - =Pr low T-2 ER t-i co a I I I I 2 A BEST COPY AVA1LA U.S. Department of Education Rod Paige Secretary Office of Inspector General John P. Higgins, Jr. Inspector General Counsel's Office Mary Mitchelson Counsel to the Inspector General May 2003 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, Counsel's Office, Semiannual Report to Congress, No. 46, Washington, DC 20202. To order copies of this report: Write to: ED Pubs, Education Publications Center, U.S. Department of Education, P.O. Box 1398, Jessup, MD 20794-1398; Fax your request to: (301) 470-1244; E-mail your request to: edpubs(&,ineted.gov; Call in your request toll-free: 1-877-433-7827 (1-877-4-ED-PUBS). If 877 service is not yet available in your area, call 1-800-872-5327 (1-800-USA-LEARN). Those who use a telecom- munications device for the deaf (TDD) or a teletypewriter (TTY) call 1-800-437-0833; or Order online at: www.ed.gov/pubs/edpubs.html. This report is also available on the Department's Website, at: www.ed.gov /offices /OIG. On request, this publication is available in alternate formats, such as Braille, large print, audiotape, or computer diskette. For more information, please contact the Department's Alternate Format Center at (202) 260-9895 or (202) 205-8113. U.S. Department of Education Office of Inspector General Semiannual Report to Congress: No. 46 October 1, 2002 - March 31, 2003 4 UNITED STATES DEPARTMENT OF EDUCATION OFFICE OF INSPECTOR GENERAL THE INSPECTOR GENERAL April 30, 2003 Dear Mr. Secretary: I am pleased to submit to you, in accordance with the Inspector General Act of 1978 (Public Law 95-452, as amended, section 5(b)), this semiannual report on the activities of the Department's Office of Inspector General for the six-month period ending March 31, 2003. Ensuring equal access to quality education is a top priority of our nation and the central mission of the Department. You have set the Department on a course of excellence in financial management, program delivery, and operations to meet this fundamental goal. Our audits, investigations, and inspections support this goal by providing independent and objective analysis to identify shortcomings and make recommendations for improvements. We look forward to continuing our work with you on the challenges facing the Department. As this report evidences, our work focuses on our shared goal of achieving and maintaining accountability throughout the Department. The Inspector General Act requires you to transmit this report within 30 days to the appropriate congressional committees and subcommittees, together with a report containing any comments you wish to make. Your report should also include the statistical tables specified in section 5(b)(2) and (3), and a statement with respect to audit reports on which management decisions have been made, but final action has not been taken, as specified in section 5(b)(4). Enclosure Sincerely, John P. Higgins, Jr. 400 MARYLAND AVE., S.W. WASHINGTON, D.C. 20202-1510 Our mission is to ensure equal access to education and to promote educational excellence throughout the nation. 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 October 1, 2002 through March 31, 2003. During this period, we issued 55 audit and inspection reports and memoranda and closed 120 investigations. We also testified before Congress on improvements in the Department's financial management. Our work demonstrates OIG's commitment to assist the Department in its implementation of the President's Management Agenda and in resolution of its major management challenges. We directed significant resources to the Agenda's goal to eliminate fraud and error in student financial aid programs. We continue to find that applicants, school and administrative officials, and others attempt to obtain funds from these programs illegally. We recently completed an analysis to help the Department identify critical risks based on our extensive experience in student financial aid programs. We recommended controls to safeguard these programs and help the Department meet its objective to remove them from the General Accounting Office's high-risk list. We also focused attention on the Department's financial management, budget and performance integration, and expanded electronic government to advance its efforts in meeting other items on the President's Management Agenda. For example, we examined challenges to.the timely and accurate preparation of the Department's financial statements, compliance with funding requirements for certain elementary and secondary programs, and protection of critical infrastructure, including information technology. We made significant recommendations in these areas providing valuable guidance for the Department to improve the integrity, effectiveness, and efficiency of its programs and operations. This is our first semiannual report since my Senate confirmation on November 14, 2002. My senior staff and I, together with all OIG, look forward to continued partnership with the Secretary and Congress in our common goal of a Department of Education that delivers programs and services for the nation's students with the highest standards of excellence and accountability. John P Higgins, Jr. Inspector General Contents MESSAGE TO CONGRESS ACTIVITIES AND ACCOMPLISHMENTS 1 PMA Goal: Improved Financial Performance 1 Financial Statement Audits 1 Testimony on Financial Management 1 Financial Integrity Investigations 2 PMA Goal: Budget and Performance Integration 2 Compliance with IDEA Funding Requirements 2 Migrant Education 3 Continued Non-Compliance by High-Risk Pacific Island Grantees 3 Controls over Equipment in the Virgin Islands 3 Talent Search Program at Luther College 4 Fraud against Elementary and Secondary Programs 4 PMA Goal: Expanded Electronic Government 4 Critical Infrastructure Protection Program 4 Network Intrusion (Hacking) Investigations 5 PMA Goal: Elimination of Fraud and Error in Student Aid Programs 5 Fraud by Administrative and School Officials 5 Fraud by Student Aid Consultants 6 Fraud by Students 7 Inconsistent and Invalid Guidance 7 Improper Use of Reserve Funds 7 Strengthening Accreditation Standards 8 Measuring Contractor Performance 8 Other Activities 8 Security 8 Nonfederal Audits 9 Reporting Requirements (P.L. 95-452) 10 Table 1: Recommendations Described in Previous Semiannual Reports on Which Corrective Action Has Not Been Completed 11 Table 2: ED/OIG Audit Service's Reports on Education Department Programs and Activities (October 1, 2002 to March 31, 2003) 12 Table 3: Other ED/OIG Reports on Education Department Programs and Activities (October 1, 2002 to March 31, 2003) 15 Table 4: Inspector General Issued Audit Reports with Questioned Costs 16 Table 5: Inspector General Issued Audit Reports with Recommendations for Better Use of Funds 16 Table 6: Unresolved Reports Issued Prior to October 1, 2002 16 Table 7: Investigation Services Cumulative Actions (October 1, 2002 to March 31, 2003) . . 21 Table 8: Statistical Profile: October 1, 2002 to March 31, 2003 27 Activities and Accomplishments The Office of Inspector General (OIG) for the period October 1, 2002 through March 31, 2003, continued its work to improve the programs and operations of the Department of Education (Department) and to protect their integrity. We emphasized work to assist the Department in meeting the mandates of the President's Management Agenda (PMA) and have summarized our work in these areas. Detailed information is available on our website at http://www.ed.gov/offices/01G. PMA Goal: Improved Financial Performance The Department has made improvements in its financial management, and has taken steps toward establishing and maintaining a system of internal controls necessary for continued improvements. These improvements enabled the Department to reach its stated goal of an unqualified opinion on its Fiscal Year (FY) 2002 financial statements. FINANCIAL The independent auditors, Ernst & Young, LLP, issued reports on the FY 2002 financial STATEMENT statements for the Department and for Federal Student Aid (FSA). The reports noted AUDITS progress in the Department's implementation of a new general ledger software package and in FSA's implementation of a new financial management system. The Department also made progress on financial reporting related to credit reform. For example, it improved financial statement disclosures, monitored key credit reform accounts, began a process to study key assumptions in the subsidy models, and participated with the Office of Management and Budget (OMB) in a Student Loan Audit Modeling Working Group. ("U.S. Department of Education Financial Statement Audit Reports," ED- OIG /A17- 00008: January 17, 2003) TESTIMONY ON FINANCIAL MANAGEMENT While the Department has made progress, significant management issues continued to impair its ability to accumulate, analyze, and present reliable financial information during FY 2002. The Department must resolve several critical challenges if it is to prepare timely and accurate financial statements and continue to improve its overall financial management. First, it needs to strengthen its financial management by improving its processes for reconciliations and account analysis. Second, it must ensure that it has the capacity to produce interim and final financial statements so as to meet OMB's accelerated schedule. Third, the Department needs to improve controls to adequately safeguard the security of its financial management systems. In March, Deputy Inspector General Thomas A. Carter testified before the Subcommittee on Select Education, Committee on Education and the Workforce, United States House of Representatives, on the Department's improvements in financial management. His testimony emphasized the need for strong controls to sustain these improvements. For example, we noted that there is a greater risk of fraudulent reporting by recipients when program performance and results have financial consequences, as they will under the No Child Left Behind Act. Therefore, it is essential to have strong controls to help ensure the accuracy and reliability of program performance data submitted by grantees. Office of Inspector General FINANCIAL INTEGRITY INVESTIGATIONS We also emphasized the importance of monitoring to improve the financial management of, and accountability for, federal education expenditures. Vigorous monitoring of programs and contracts helps ensure that federal education dollars are administered and used in the most effective and efficient manner, and is vital to assuring program success. 14 r'-ws.-----.P...inr^z;7r, . Mir 1" Gateway V OIG Special Agents transport evidence to court .oat Testifying before the House Subcommittee on Select Education Our investigations resulted in a significant number of arrests, convictions, indictments, jail sentences, and monetary restitutions to the government for fraud against the Department's programs. The last three persons charged in a wide-ranging conspiracy to defraud the Department of over one million dollars in electronic equipment and false overtime charges were found guilty after a federal trial. Also, in a related matter, Verizon Federal Systems entered ,1 into a $2 million civil settlement with the Department for federal claims on false overtime charges and improper purchases by Verizon employees who conspired with the Department employees. To date, nineteen persons, including eight Department employees, have either pled guilty to federal charges or been convicted after a federal trial in this case, and fourteen have been sentenced. Our ongoing investigation of Department employees who used their government credit cards to obtain more than $163,000 in money, goods, and services for their personal benefit resulted in two guilty pleas. These individuals also received over $30,000 in kickbacks from vendors by certifying as accurate, invoices they knew were false. The Department employees are awaiting sentencing. PMA Goal: Budget and Performance Integration Our audits of States' compliance with statutory and regulatory provisions intended to ensure the efficient, effective, and equitable distribution and use of federal funds found weaknesses in program administration at both the State and federal levels. COMPLIANCE We issued a report on our audit of selected States' WITH IDEA compliance with the funding requirements under the FUNDING Individuals with Disabilities Education Act (IDEA). Our REQUIREMENTS review found that Florida, Tennessee and Rhode Island, three of the six States we audited, did not comply with the formula for distribution of flow-through funds in FY 2000. As a result, all 332 local education agencies in those States received the wrong amount of IDEA funding, with some under-funded by as much as 40. Semiannual Report To Congress: #46 MIGRANT EDUCATION CONTINUED NON- COMPLIANCE BY HIGH-RISK PACIFIC OUTLYING AREAS GRANTEES $599,000 and some over-funded by as much as $838,000. Our findings indicate that there is a high probability that more States have incorrectly calculated the funding formula or incorrectly distributed their IDEA allocations. We recommended that the Department provide clearer guidance to all of the States on calculating and distributing their IDEA allocations, and require the 44 States we did not audit, as well as the District of Columbia and Puerto Rico, to reaffirm that they had correctly calculated and distributed their data. The Department generally concurred with our conclusions and recommendations. ("Audits of Six States' Compliance with the Funding Formula Requirements of the Individuals with Disabilities Education Act," ED- OIG/A06-B0029: December 19, 2002) We completed an audit at the Texas Education Agency (TEA) that examined the procedures for identifying migrant children who qualify for "priority for services." The Elementary and Secondary Education Act (as reauthorized by the No Child Left Behind Act) provides that migrant children who are at risk of failing and whose education has been interrupted should receive priority for services. We found that TEA had not established or implemented procedures to identify and target migrant children eligible for this priority for services. As a result, the Department has no assurance that Texas used the $53 million it received in Fiscal Year 2001 Migrant Education program funds to benefit priority for services migratory children before it provided services to other migratory children. TEA concurred with our recommendations and is implementing corrective action. ("The Migrant Education Program at the Texas Education Agency," ED-OIG/A06- C0030; February 5, 2003) In our continuing oversight role, we informed the Department about serious accountability and compliance issues involving grantees in the Pacific Outlying Areas. The first concerned misuse of education funds by grantees. Our preliminary audit and investigation work revealed instances of fraud, waste, and abuse that-might have been detected and prevented through consistent oversight, such as on-site monitoring and ensuring that Single Audits and performance reports were completed and submitted on time. We advised the Department that it should develop a coordinated strategy to monitor the Pacific Outlying Areas grantees, including on-site monitoring visits, and the Department agreed. The Department has assigned a Department-wide team to address problems in the Pacific Outlying Areas, as well as teams to address problems in Puerto Rico and the Virgin Islands. We also informed the Department of Pacific Outlying Areas grantees' failure to submit timely financial and compliance audits in accordance with Single Audit Act requirements. Such audits would have informed the Department and other federal grantor agencies about whether the grantees had properly expended and accounted for federal funds, had proper internal controls in place, and had complied with laws and regulations pertaining to major federal programs. We advised the Department to work with each Pacific Outlying Areas grantee to develop a plan for it to meet the audit requirements. We also advised the Department that before the statute of limitation periods expire, it should consider demanding that each Pacific Outlying Areas grantee repay the Department all funds drawn down that were not subjected to Single Audits. In general, the Department concurred. 0 Office of Inspector General CONTROLS OVER EQUIPMENT IN THE VIRGIN ISLANDS TALENT SEARCH PROGRAM AT LUTHER COLLEGE FRAUD AGAINST ELEMENTARY AND SECONDARY PROGRAMS Our audit of the Virgin Islands Department of Education, St. Croix School District's (VIDE-St. Croix) controls over equipment purchased with federal eduation funds, found that VIDE-St. Croix did not maintain adequate inventory and management controls and could not account for $1,017,416 in equipment. VIDE-St. Croix agreed with most of our recommendations and outlined corrective actions that were responsive to the weaknesses we identified. ("The Virgin Islands Department of Education-St. Croix School District's Control of Equipment Inventory," ED-01G/A02-00019; March 31, 2003) Our audit of the Talent Search program at Luther College, Decorah, Iowa, found that the program served significantly fewer participants than it was funded to serve, or than required by regulation, making it ineligible for federal funds for the period covered. We recommended that the Department require Luther College to refund the entire $219,567 expended during its Talent Search program for the 2001-2002 budget period, and establish and properly document procedures to ensure that only those participants receiving eligible services are counted as Talent Search participants. Luther College did not concur with our finding or recommendations, but advised us it had taken corrective actions. We also recommended that the Department monitor the current Luther College Talent Search project to determine whether the college will be able to meet required minimum participant numbers or should have its grant withdrawn. We further recommended that the Department review the college's three prior budget periods to verify that the participant numbers were met in each budget period, and take appropriate action. ("Talent Search Program at Luther College," ED- OIG /A07- C0031; March 28, 2003) OIG investigations of fraud in elementary and secondary education programs resulted in several significant prosecutive actions. Our joint investigation with the Federal Bureau of Investigation (FBI) led to a three-year prison sentence and an order to pay over $260,000 in restitution for a former administrative assistant who fraudulently obtained Title I funds from Oakdale school district in Oklahoma. Our investigation of the Florida Institute for Workforce Innovation resulted in the executive director of the institute signing an agreement to repay the Department over $285,000 in Vocational Rehabilitation funds. As previously reported, an extensive joint OIG/FBI investigation involving fraudulent contracts for services under the Goals 2000 program and Technology Literacy Challenge Fund with the Puerto Rico Department of Education, resulted in a jail sentence and forfeiture order totaling over $800,000 for the President of RV Research and Management. As part of this investigation, the former Puerto Rico Secretary and Associate Secretary of Education were sentenced in December 2002 to 12 and 11 years respectively, for using their positions to extort $4.3 million from Puerto Rico Department of Education contractors. Cash seized by OIG Special Agents 11 Semiannual Report To Congress: #46 CRITICAL INFRASTRUCTURE PROTECTION PROGRAM NETWORK INTRUSION (HACKING) INVESTIGATIONS FRAUD BY ADMINISTRATIVE AND SCHOOL OFFICIALS PMA Goal: Expanded Electronic Government In our ongoing work to support the President's e-government mandate, we participated in several intergovernmental projects and activities to assist the Department and to assess its progress in securing its information technology (IT) resources. We completed an audit of the Department's Critical Infrastructure Protection (CIP) program as part of a government-wide effort coordinated through the President's Council on Integrity and Efficiency. The Department is expected to have a CIP program to protect the infrastructure it needs to provide services for its core missions. We examined the Department's plans for protection of its critical cyber-assets and its progress in implementing these plans since our previous review in 2000. We found that while the Department has made progress in several areas, including strengthening its CIP planning and identifying vulnerabilities in critical systems, the CIP program is still at risk primarily because of a lack of effective monitoring and resource commitment. We made several recommendations to the Department for improvement, in these areas. The Department agreed with our recommendations. ("Critical Infrastructure Protection Program (CIP) Phase II Review - Protection of Cyber Assets," ED-OIG/A11-D0001; March 28, 2003) We conducted network intrusion investigations of offenses against the Department's computer networks, including investigations of website defacements and unauthorized access from interne protocol (IP) addresses located in several different countries. We actively participated in the FBI Inter-Agency Coordination Cell for computer crimes and other federal computer crime workgroups. We provided special computer security advisories relating to new cyber exploits and vulnerabilities to Department officials, colleges, and universities. PMA Goal: Elimination of Fraud and Error in Student Aid Programs The Department's student financial assistance programs disburse about $65 billion annually. The Department also manages a $267 billion loan portfolio. We direct a significant portion of our investigative and audit work to these programs, where we continue to find fraud by financial aid officials and recipients as well as weaknesses in program administration. We issued a memorandum to the Department summarizing the schemes used by participants in the student financial assistance programs to obtain funds illegally or inappropriately. Our analysis was based on OIG audit and investigative work over the last several years, and included suggestions to assist the Department in addressing these problems. We investigate cases in which administrative and school officials use their positions to fraudulently obtain federal student aid moneys. Some examples of these cases follow. The owner, registrar, director of education, and other employees at The Training Center, a computer and travel school in Michigan, were indicted for falsifying documents to illegally obtain student financial aid. The indictment included an $875,000 forfeiture to recover the funds these individuals illegally received. 12 Office of Inspector General Three collection agency officials associated with Unger & Associates, Inc. in Texas were sentenced to prison and each was ordered to pay restitution of over $1 million. This agency contracted with over 200 educational institutions to collect on defaulted Perkins loans; however, instead of returning the collected funds to the institutions, these officials kept the money for their personal use. The former assistant financial aid director at Carson Newman College and her husband were sentenced to prison and ordered to pay $287,500 restitution for using a false Social Security number to submit fraudulent Federal Family Education Loan (FFEL) applications. The financial aid director at Manhattan College in New York was incarcerated and ordered to pay more than $163,000 for submitting fraudulent FFEL applications. Two individuals in Indiana were indicted for forging school certifications, exceeding maximum loan limits, and conspiring to fraudulently obtain over $146,000 in FFEL funds. 40C VOL SE( tit The admissions director at the Hair Design School in Tennessee received a jail sentence and was ordered to pay more than $26,000 restitution for creating false GED test scores for students at the school. This crime caused the disbursement of over $100,000 in federal loans and grants to ineligible students. The former chief financial officer at Le Moyne- Owen College in Tennessee was sentenced to prison and ordered to pay $42,000 in restitution after he cashed student aid refund checks and kept the funds for himself Our investigation at Beacon Career Institute (BCI) in Florida revealed a major Pell Grant case that defrauded the Department of over $720,000. We found the former BCI administrator and other BCI officials created false documents to justify the disbursement of these grants. They were ordered to pay restitution totaling $1,778,472 and sentenced to prison. We also made a referral to the Immigration and Naturalization Service that led to criminal charges against the former administrator for bringing aliens into the country; he received a jail term of three years for this offense. The former administrator also used an alias to purchase the Caribbean Beauty and Technical Institute in Puerto Rico. He was charged in Miami with student aid fraud at the Institute that resulted in disbursement of over $1.7 million in Pell Grant funds. He is now incarcerated. Our investigation of a former instructor at Piedmont College of Hair Design in South Carolina led to a guilty plea and an order to pay restitution of $27,000 for Pell Grant fraud. Her actions caused over $300,000 in Pell Grants to be given to ineligible students. The director of foreign students and two professors at Morris Brown College in Atlanta were indicted on 113 counts for conspiring to commit student visa fraud, allowing ineligible students to receive aid. The former associate financial aid director at Central Michigan University who received approximately $26,000 in federal direct student loans by using her position to remove her financial aid suspension status from the school's computerized records was indicted for these actions. The former coordinator of the Work-Study program at Union University in Tennessee stole more than $70,000 from the program and pled guilty. BEST COPY AVAILABLE Semiannual Report To Congress: #46 FRAUD BY STUDENT AID CONSULTANTS FRAUD BY STUDENTS11. INCONSISTENT AND INACCURATE GUIDANCE IMPROPER USE OF RESERVE FUNDS Our investigation of Joseph & Associates, a financial consulting business in Illinois, led to 53 settlements and civil judgments totaling over $465,525 in the last six months. The owner of the business created false federal income tax returns to verify false income amounts that enabled ineligible students to qualify for financial aid. We disclosed over 700 students who used this service. A joint OIG/U.S. Postal Inspection Service investigation led to the conviction of an individual in Los Angeles for student aid fraud. This individual conducted weekly seminars for parents and students, charging them approximately $300 for the programs at which he advised and assisted them in preparing student aid applications that deliberately misstated their income or dependency status. The potential loss to the government from his actions was approximately $800,000. OIG special agents investigate many cases in which individuals falsify their income, commit identity theft, create false test scores, and commit other types of fraud to illegally qualify for federal student aid. A student attending Bethel College in Kansas was indicted for using another person's identity to obtain approximately $50,000 in federal student aid. A former student at Cleveland State University was indicted for using a false Social Security number and date of birth to obtain approximately $10,000 in loans and grants after defaulting on loans he received using his own identity. A former civilian Army employee in Georgia who used false Social Security numbers to fraudulently obtain student aid agreed to forfeit $30,000 in fraudulent tax refunds. We alerted the Department that its Federal Student Aid Handbook contained guidance that could result in schools disbursing federal student aid to non-citizens who are not eligible for the aid. The Higher Education Act (HEA) requires that non-citizens must provide certain evidence from the Immigration and Naturalization Service to be eligible for student financial assistance. We found that the guidance the Department provided to schools on the interpretation of HEA's citizenship requirements was inconsistent and inaccurate. We estimated that this guidance contributed to schools nationwide disbursing approximately $5.4 million in aid to more than two thousand potentially ineligible students. We made suggestions for changes to the guidance, and the Department reported to us that it is revising the handbook and will address the issues we raised. Our audits have repeatedly shown that guaranty agencies have improperly excluded FFEL funds from, or failed to deposit them into, the Federal Fund (reserve funds) as required by the HEA. We have completed eight audits on this misuse of funds. Our audit at Educational Credit Management Corporation (ECMC) found that ECMC transferred $14.6 million in reserve funds to its Operating Fund. We recommended that the Department require ECMC to return these funds plus imputed interest to its Federal Fund and reimburse the fund for any misallocated costs. ECMC disagreed with these findings. ("Educational Credit Management Corporation's Administration of the Federal Family Education Loan Program Federal and Operating Funds," ED- OIG /A05- C0014; March 18, 2003) Our audit of excess reserve funds at ECMC found that the Department had not recalled excess reserve funds totaling about $103 million as of September 30, 2001, leaving them available for ECMC to use for unintended purposes. We recommended that the 14 Office of Inspector General Department recall the entire $103 million as well as excess reserves in each subsequent year, and clarify its agreement with ECMC. The Department generally concurred with our findings and recommendations. ("Educational Credit Management Corporation's Administration of the Federal Family Education Loan Program Federal and Operating Funds for the period April 1, 2000 through March 31, 2001,"ED-OIG/A05-D0001; March 20, 2003) Our audit of the California Student Aid Commission (CSAC) concluded that CSAC improperly used $7.4 million of its Federal Fund for accrued administrative expenses and $4.5 million of the funds for purchases used to administer the FFEL program. We recommended that the Department require CSAC to reimburse the Federal Fund for these improper expenditures, plus imputed interest. CSAC advised us that a cash transfer was made to the Federal Fund for the lost interest, but did not agree with our other findings and recommendations. ("California Student Aid Commission's Administration of the Federal Family Education Loan Program Federal and Operating Funds," ED-OIG/A09-00013; March 27, 2003) STRENGTHENING Our reviews at two accrediting agencies found that their standards ACCREDITATION for measuring student achievement and program length need to be STANDARDS strengthened. We suggested several ways that the National Accrediting Commission of Cosmetology Arts and Sciences (NACCAS) could strengthen its standards. NACCAS indicated it would refer our suggestions to its advisory committee on standards. ("National Accrediting Commission of Cosmetology Arts and Sciences' Accreditation Standards for Student Achievement and Measures of Program Length,"ED-OIG/A09-00019; December 19, 2002) We found that the Southern Association of Colleges and Schools (SACS) provided institutions with detailed guidance but did not include specific measures, giving the agency a limited ability to compare institutions' performance. We offered suggestions for enhancing SACS' standards and management controls, which SACS indicated it would forward to its board. ("Southern Association of Colleges and Schools, Commission on Colleges' Accreditation Standards for Student Achievement and Program Length," ED- OIG/A09-00018; January 17, 2003) MEASURING We reviewed Federal Student Aid's (FSA) Modernization Partner Agreement to determine CONTRACTOR the adequacy of the indicators used to measure contractor performance, to assess the PERFORMANCE agreement's compliance with laws and regulations, and to determine the accuracy of the costs of the products and services provided. The Modernization Partner Agreement between FSA and a contractor was developed to meet statutory requirements for FSA to improve service, reduce costs, and integrate information systems. FSA has obligated nearly $244 million to this Agreement. We found that FSA had not completed an annual review of the Agreement to ensure that it continues to represent the best value for products and services. The Department generally concurred with our findings and recommendations. ("FSA's Modernization Partner Agreement," ED-OIG/A07-B0008; November 20, 2002) 15 Semiannual Report To Congress: #46 SECURITY Oth ctivities OIG continues to actively review the Department's security efforts beyond the IT arena. We completed several reviews, including an analysis of our Department safety and security survey. We compiled responses to the survey and provided a comprehensive report to the Department, requesting a response regarding certain issue areas prior to publishing the final survey. ("Results of the 2002 Department of Education Safety and Security Survey," ED-OIG/113-D0006; January 2, 2003) In addition, we completed a review of certain contractor personnel working in the Department who did not have proper security clearances appropriate to the work they performed, and issued a memorandum to the Department. Our review demonstrated the need for the Department to systematically implement its new contractor security clearance policy, which was in draft form at the time of our review. The policy will require personnel security screenings and risk-level determinations to ensure that contractors have clearances appropriate to the work they will perform. ("Clearances for eSource Contract Personnel," ED-01G/113-D0005; January 24, 2003) We also requested that the Department establish a Building Security Committee for one of its buildings, a , as required by the General Services Administration, to a ensure that safety and security issues are made known to the proper officials. The Department has appointed a chairman for the committee. ("Review of the Mary E. Switzer Building Security Committee," ED- OIG /I13- D0003; December 2, 2002) We will continue our efforts to strengthen the security of the Department's workforce and physical infrastructure. NONFEDERAL Participants in Department programs are required to submit annual audits performed by AUDITS independent public accountants (IPAs). We perform quality control reviews (QCRs) of audits conducted by IPAs to assess the quality of nonfederal audits. We completed 52 QCRs of audits conducted by 47 different IPAs, or offices of firms with multiple offices. We concluded that 34 (65%) were acceptable, 15 (29%) were technically deficient, and 3 (6%) were substandard. We also referred three IPAs to the appropriate State Boards of Accountancy and the American Institute (or State Society) of Certified Public Accountants for possible disciplinary action for substandard work. These IPAs were referred for work reported in a prior semiannual report. BEST COPY AVAILABLE Office of Inspector General 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 11 5(a)(4) Matters Referred to Prosecutive Authorities Investigation Services Cumulative Actions (October 1, 2002 to March 31, 2003) 7 21 Statistical Profile 8 27 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 12 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 16 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 16 5(a)(10) Summary of Unresolved Audit Reports Issued Prior to the Beginning of the Reporting Period Unresolved Reports Issued Prior to October 1, 2002 6 16 5(a)(11) Significant Revised Management Decisions ** ** 5(a)(12) Significant Management Decisions with Which OIG Disagreed ** ** * Information found on pages 1-9 of this report. ** No instances to report. 17 Semiannual Report To Congress: #46 RecohmendatEons Descolbed Prev]o us Se[ardannuag Reports OD Mach Correcthfe Acttion Has of Been Complhated Report Number Report Title (Prior Semiannual Report Number ISARI and Page) Date Issued Date Resolved Total Monetary Findings Number of daons ti Recommendations latest Target Date Open J Closed 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 AUDITS SINCE LAST REPORTING PERIOD Office of Postsecondary Education- A04-90013 Office of Higher Education Programs Needs to Improve its Oversight of Parts A and B of the Title III Program (SAR 42, pp. 10-11) 12/27/00 1/31/02 1 16 8/1/03 Federal Student Aid A05-A0025 Great Lakes Higher Education Guaranty Corporation's (Great Lakes Guaranty) Administration of the Federal Family Education Loan (FFEL) Program Federal and Operating Funds (SAR 42, p. 22) 3/30/01 1/31/02 . * 4 3 6/30/03 Office of the Chief Financial Officer A03-B0018 Audit of Department Discretionary Grants Monitoring Process (SAR 44, p. 3) 10/24/01 3/26/02 * 2 0 6/30/03 Office of Elementary and Secondary Education A04-A0005 Audit of the Governor's Program Portion of the Safe and Drug-Free Schools and Communities Act (SAR 42, p. 21) 3/30/01 3/26/02 * 5 1 7/31/03 Office of the Chief Information Officer A11 -A0011 Audit of the Department's Records Management Program (SAR 43, p. 11) 9/27/01 3/28/02 * 5 2 11/30/03 A11 -B0007 Government Information Security Reform Act (SAR 43, p. 3) 9/7/01 3/28/02 11 4 9/30/03 AUDITS REPORTED IN PREVIOUS SEMIANNUAL REPORTS Federal Student Aid A01-90005 The Recertification Process for Foreign Schools Needs to Be Improved (SAR 41, p. 23) 9/29/00 3/31/01 * 1 3 6/30/03 A17-A0003 Fiscal Year 2000 Annual Financial Statements Student Financial Assistance (SAR 42, pp. 1-2) 2/28/01 6/30/01 * 1 17 6/30/03 Office of the Chief Financial Officer A17-A0002 Fiscal Year 2000 Annual Financial Statements U.S. Department of Education (SAR 42, pp. 1-2) 2/28/01 9/30/01 1 20 6/30/03 . Office of the Chief Information Officer All-90013 Review of Security Posture, Policies and Plans (SAR 40, p. 3) 2/25/00 6/30/00 2 11 6/30/03 A11-90018 Review of EDNET Security (SAR 41, p. 22) 7/10/00 3/31/01 * 2 58 5/31/03 BEST COPY AVAILABLE Office of Inspector General TabOe 2: Recommendations Desculbed lD Prevrioa.us Semfiannag3J0 Reports o Wh5ch Corrective Actrion Has Mot Been Compileted (Cont.) Report Number Report Title (Prior Semiannual Report Number ISARI and Page) Date Issued Date Resolved Total Monetary Findings Number of Recommendations Latest Target Date Open Closed All-A0005 Review of Planning and Assessment Activities for Presidential Decision Directive 63 on Critical Infrastructure Protection (SAR 41, p. 22) 9/14/00 3/31/01 * 2 8 6/30/03 Office of Postsecondary Education A04-90014 Review of Title III Program, HEA, Compliance with GPRA Requirements for Implementation of Performance Indicators (SAR 41, p. 23) 6/30/00 3/31/01 * ** 7 ** * Non-monetary. ** Closure request was not received by the Department before reporting period ended (3/31/03). T'aMe 20 E19/0IIS Land5t Sep-Aces Reports on Ethocat5on Department Programs and Act5v5tfies (October 2, 2002 to March 32, 2003) Report Number Report Title Date Issued Questioned Costs* Unsupported Costs Better Funds Use of I , Fds No. of Recommen- dations Section 5(a)(6) of the Inspector General Act of 1978 (RE 95-452) requires a listing of each report completed by OIG during the reporting period. During this semiannual reporting period, ED/OIG auditors issued 27 audit reports. In addition, we issued 19 alternative products, which include 2 action memorandal, 8 alert memoranda2, 2 management information reports3, 1 special project3, and 6 closeout letters4. The audit reports and alternative products (except for the action and alert memoranda) are listed below. AUDIT REPORTS Federal Student Aid A05-00014 Educational Credit Management Corporation's Administration of the Federal Family Education Loan Program Federal and Operating Funds 3/18/03 $15,096,156 10 A05-00015 Audit of American School of Technology's Administration of the Title IV, HEA Programs, Columbus, Ohio 3/21/03 $1,311,249 13 A05-D0001 Audit of Educational Credit Management Corporation's (ECMC) Administration of the Federal Family Education Loan (FFEL) program Federal and Operating Funds for the period April 1, 2000 through March 31, 2001 (OPE also designated as action official for this report) 3/20/03 $103,000,000 7 A06-B0025 Arizona Automotive Institute's Administration of the William D. Ford Federal Direct Loan Program 1/8/03 $253,006 2 A06-00018 Gretna Career College's Administration of the Title IV Student Financial Assistance Programs 12/19/02 $1,383,470 6 A07-B0008 Audit of FSA's Modernization Partner Agreement (OCFO also designated as action official for this report) 11/20/02 5 A09-B0025 United Education Institute's Administration of Student Financial Assistance Programs 12/23/02 2 BEST COPY AVAILABLE i 9 Semiannual Report To Congress: #46 TabOe ED/OEG AudEt Seru5ces Reports on Eda.ocaUon Department Programs and ActMUes (October 2.1, 2002 to March 332.1, 2003) (Cont.) Report Number Report Title Date Issued Questioned Costs* Unsupported Costs Better Use of Funds No. of Recommen- dations A09-00013 California Student Aid Commission's Administration of the Federal Family Education Loan Program Federal and Operating Funds 3/27/03 $15,887,163 $571,809 8 A17-00009 Financial Statement Audits Fiscal Years 2002 and 2001 Federal Student Aid (OCFO also designated as action official for this report) 1/31/03 10 A19-00006 Audit of the Department of Education's Controls over the Access, Disclosure, and Use of Social Security Numbers (SSNs) by Third Parties 10/31/02 4 Office of the Chief Financial Officer A02-D0005 Audit of a Contract between Abt Associates Inc. (Abt) and the U.S. Department of Education (ED) for the Reading Excellence Act School and Classroom Implementation and Impact Study 3/28/03 A03-00001 Contract Closeout Audit of Costs Claimed for Temple University's (TU) Laboratory for Student Success (LSS), Contract Number RJ96006201, for the period December 11, 1995, through December 16, 2000 10/25/02 1 A03-00020 Audit of Booz Allen Hamilton's (BAH) Contract Awards with the U.S. Department of Education (ED) 3/31/03 A17-00008 Financial Statement Audits Fiscal Years 2002 and 2001 U.S. Department of Education (FSA also designated as action official for this report) 1/31/03 10 A17-D0002 Federal Intragovernmental Activity and Balances Agreed-Upon Procedures Report 2/6/03 A17-D0003 Agreed-Upon Procedures Report Fiscal Year 2002 Federal Agencies' Centralized Trial-Balance System 2/6/03 Office of the Chief Information Officer A 11-D0001 Phase II Audit of the Department's Critical Infrastructure Protection (CIP) Program (limited distribution due to sensitivity of subject) 3/28/03 7 A19-B0011 Audit of Controls over Government Calling Cards 10/24/02 12 Office of Elementary and Secondary Education A02-00019 The Virgin Islands Department of Education-St. Croix School District's Control of Equipment Inventory (OSERS also designated as action official for this report) 3/31/03 $1,017,416 7 A05-00022 Audit of Community Consolidated School District 62's (District) Administration of the 21st Century Community Learning Centers (21st Century) Grant for the period June 1, 2000, through May 31, 2002 (OUS also designated as action official for this report) 2/24/03 $126,709 3 A06-00030 Audit of the Migrant Education Program at the Texas Education Agency (TEA) 2/4/03 3 ) 0 BEST COPY AVAILABLE Office of Inspector General Tabge CSo ED/ORG Aud5t SerAces Reports on EducaVon Department Programs and ActMt5es (October 1, 2002 to March 311, 2003) (Cont.) Report Number Report Title Date Issued Questioned Costs* Unsupported Costs Better Use of Funds No. of Recommen- dations Office of Intergovernmental and Interagency Affairs A17-B0018 Contribution Accounts Delegated to the Assistant Secretary for Intergovernmental and Interagency Affairs 10/18/02 $43 1 9 Office of Postsecondary Education A04-00014 Audit of Kentucky State University's (KSU) Compliance with the Administration of the Title III, Part B, Strengthening Historically Black Colleges and Universities Program 3/12/03 $28,083 4 A05-00026 Audit of Northeastern Illinois University's (NEIU) Administration of the Developing Institutions - Hispanic- Serving Institutions (HSI) Grant for the period October 1, 2000, through October 31, 2002 2/25/03 $478,261 2 A07-00031 Audit of the Talent Search Program at Luther College 3/28/03 $219,567 4 Office of Special Education and Rehabilitative Service A06-B0029 Audits of Six Selected States' Compliance with the Funding Formula Requirements of the Individuals with Disabilities Education Act (IDEA) . 12/19/02 3 Office of Vocational and Adult Education A05-00021 Audit of the Ohio Department of Rehabilitation and Correction's (ODRC) Grants to States for Workplace and Community Transition Training for Incarcerated Youth Offenders Program (Youth Offenders Program) for the period July 1, 1998, through October 31, 2000 2/3/03 $270,000 4 ALTERNATIVE AUDIT SERVICES PRODUCTS Federal Student Aid A02-B0001 Audit of Foreign Schools' Cohort Default Rates (closeout letter) 10/25/02 A06-00025 Audit at Miami-Dade Community College (MDCC) (closeout letter) 11/1/02 A06-00027 Audit at Los Angeles ORT Technical Institute (LA ORT) (closeout letter) 11/1/02 A06-00029 Audit of Platt College's (Platt) Compliance with Title IV Student Financial Assistance Requirements (closeout letter) 11/15/02 A06-D0002 Audit at The Fashion Institute of Design & Merchandising (FIDM) (closeout letter) 1/8/03 A19-00007 Audit of Federal Student Aid (FSA) Telecommunications Contracts (closeout letter) 12/20/02 Office of Postsecondary Education A09-00018 Southern Association of Colleges and Schools, Commission on Colleges' Accreditation Standards for Student Achievement and Measures of Program Length (Management Information Report) 1/17/03 BEST COPY AVAILABLE 21 Semiannual Report To Congress: #46 TaNe ED/013 AalcHt SerAces Reports on Educatrion Department Programs and ActMUes (October nr 2002 to March 3ni, 2003) (Cont.) Report Number Report Title Date Issued Questioned Costs* Unsupported Costs Better Use of Funds No. of Recommen- dations A09-00019 National Accrediting Commission of Cosmetology Arts and Sciences' Accreditation Standards for Student 12/19/02 Achievement and Measures of Program Length (Management Information Report) Office of the Secretary (OS/OUS/ODS) S03-D0005 Office of Inspector General's Independent Report on the U.S. Department of Education's Detailed 1/30/03 Accounting of Fiscal Year 2002 Drug Control Funds, dated January 23, 2003 (Authentication of ED's Assertions OIG conducted per Office of National Drug Control Policy) * For purposes of this schedule, "questioned costs" also includes "other recommended recoveries." 'Action memoranda notify the Department's management of a serious condition or issue requiring immediate attention that we identified in an on-going assignment, when there is a strong likelihood that waiting until the report's issuance to notify the ED action official would result in the loss of an opportunity to prevent or curtail significant harm to the federal interest. They are not posted on our website. 2Alert memoranda are prepared when a serious condition is identified outside of the agreed-upon objectives of an on-going assignment, or while doing work not related to an on-going assignment (when an audit report will not be issued). They are also used during the conduct of an audit of an external entity when a serious condition is identified at the Departmental level and needs to be forwarded to an ED action official for his/her immediate action. Alert memoranda are not posted on our website. 3 Management information and special project reports provide management with information that can be useful in carrying out program activities. 4Closeout letters are issued to provide written notification to auditees of audit closure when the decision is made to close an assignment without issuing an audit, report. Closeout letters are not posted on our website. Tabge 3: Other IED/OIIG Reports on Educat5on Department Programs and AthvMes (Octogier 2002 to March 32., 2003) Report Number Title of Report Date Issued 113C0013 Review of the Department's Physical Security Comprehensive Plan 10/23/02 II3D0003 Review of the Mary E. Switzer Building Security Committee 12/2/02 II3D0006 Results of the 2002 Department of Education Safety and Security Survey 1/2/03 113D0005 Clearances for eSource Contract Personnel 1/24/03 113D0002 New Hire Review Results 1/30/03 113C0023 Inquiry Phase for the Transition to Teaching Program 2/6/03 113C0014 Review of the Department of Education's Annual Plan 2002-2003 Reveals Strengths and Areas for Improvement 2/7/03 113C0015 Graduation Rates for Two-Year Postsecondary Institutions 3/19/03 113C0017 Memorandum on Workforce Analysis and Succession Planning for the Office of Inspector General Analysis and Inspection Services Staff 3/20/03 BEST COPY AVAILABLE 22 Office of Inspector General TaMe 4o Enspector Geneli°ap Essued A(t.goHt Reports emEth Quest5oned Costs Number Questioned' Unsupported= A. For which no management decision has been made before the commencement of the reporting period (as adjusted) 53 $203,579,492 $45,114,089 B. Which were issued during the reporting period 13 $139,642,932 $3,450,956 Subtotals (A + B) 66 $343,222,424 $48,565,045 C. For which a management decision was made during the reporting period 12 $49,868,456 $3,429,591 (i) Dollar value of disallowed costs $49,838,456 $3,402,591 (ii) Dollar value of costs not disallowed $30,000 $27,000 D. For which no management decision has been made by the end of the reporting period 54 $293,353,968 $45,135,454 E. For which no management decision was made within six months of issuance 42 $153,711,079 $41,684,498 'Questioned costs are costs that are questioned because of either an alleged violation of a provision of a law, regu ation, contract, grant, cooperative agreement, or other agreement or document governing the expenditure of funds or a finding that the expenditure of funds for the intended purpose is unnessary or unreasonable. Other recommended recoveries are included in questioned costs. Other recommended recoveries are funds recommended for reasons other than questioned or unsupported costs. The category is usually used for findings involving recovery of outstanding funds and/or revenue earned on Federal funds. The amount also includes any interest due ED resulting from the auditee's use of funds. Amounts reported for this category are combined with questioned costs for reporting in the IG's Semiannual Report to Congress. 2Unsupported costs are costs that are questioned because, at the time of the audit, such costs were not supported by adequate documentation. 7ablle Enspector General] ssLk.ged Auent Reports w5th Recom9'I]endat5ons for Better Use of Funds Number Dollar Value No Activity to Report TaMe 62 1111nrescNved Reports Essued Polor to October 2., 2002 Report Number Report Title (Prior Semiannual Report ISARI Number and Page) Date Issued Total Monetary Findings No. of Recommen- dations 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 decision had been made by the end of the reporting period. New Since Last Reporting Period Federal Student Aid A03-B0013 Audit of the Ability-to-Benefit (ATB) Testing Process at Lincoln Technical Institute, Inc. (LTI), Philadelphia, PA (SAR 45, p. 16) Status: Audit was placed on administrative stay on October 15, 2002. A file review was requested and is being undertaken before resolution can begin. 5/10/02 $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) (SAR 45, p. 16) Status: FSA/CFO is currently working on getting an approved final audit determination letter sent out. 5/13/02 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) (SAR 45, p. 16) Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report. 9/26/02 $997,313 7 BEST COPY AVAILABLE 23 Semiannual Report To Congress: #46 'Tabge ILDTwesoDved Reports Essaged Polor to October L, 2002 (Cont.) Report Number Report Title (Prior Semiannual Report [SARI Number and Page) Date Issued Total Monetary Findings No. of Recommen- dations A05-B0019 Audit of Course Length at Trinity Christian College (Trinity) (SAR 45, p. 16) Status: Audit was placed on administrative stay on October 15, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about course length. 9/17/02 $111,061 3 A05-B0033 United Student Aid Funds, Inc.'s Administration of the Federal Family Education Loan Program Federal and Operating Funds (SAR 45, p. 16) Status: Program office is working on resolving this audit. 4/23/02 $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 (SAR 45, p. 16) Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report. 7/23/02 $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 (SAR 45, p. 16) Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report. 8/7/02 $61,466 3 A06-A0024 Audit of Commissioned Sales and Course Length at Southern Wesleyan University (SAR 45, p. 16) Status: Audit was placed on administrative stay on October 11, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales and course length. 9/4/02 $19,451,123 5 A07-A0030 Baker University School of Professional and Graduate Study's Administration of Title IV Federal Student Aid Programs (SAR 45, p. 17) Status: Audit was placed on administrative stay on October 11, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales. 9/19/02 $15,716,275 7 A07-A0031 Fontbonne University Options Program's Administration of Title IV Federal Student Aid Programs (SAR 45, p. 17) Status: Audit was placed on administrative stay on October 11, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales. 9/30/02 $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 (SAR 45, p. 17) Status: Program office is working on resolving this audit. 9/27/02 $2,672,941 10 A09-00005 Silicon Valley College's Administration of the Higher Education Act, Title IV Programs (SAR 45, p. 17) Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report. 9/20/02 $436 6 Office of the Chief Financial Officer A07-00008 Contract Closeout Audit of Office of Educational Research and Improvement Contract No. RJ96006501 at Northwest Regional Educational Laboratory (SAR 45, p. 17) Status: ED received a check in the amount of $324,845.61 dated 5/6/02 which was taken to accounts receivable on 5/31/02. This item will be removed in the next Semiannual Report. BEST COPY AVAILABLE 9/12/02 $320,195 4 24 Office of Inspector General TaMe (52 Unresohged Reports EssR.ped Polar to October Lo 2002 (Cont.) Report Number Report Title (Prior Semiannual Report [SARI Number and Page) Date Issued Total Monetary Findings No. of Recommen- dations Office of the Chief Financial Officer (dealing with discretionary grants) Office of Innovation and Improvement A05-00011 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 (SAR 45, p. 18) Status: Post Audit Group, OCFO, and 011 have been working on issues involving unsupported costs. A final audit determination letter is expected by June 30, 2003. 9/10/02 $149,430 5 A05-00020 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 (SAR 45, p. 18) Status: Post Audit Group, OCFO, and 011 have been working on issues involving unsupported costs. A final audit determination letter is expected by June 30, 2003. 9/10/02 . $140,716 4 Office of the Chief Financial Officer (dealing with discretionary grants) Office of Postsecondary Education A03-B0026 Audit of Delaware State University's Administration of the Title III Strengthening Institutions HBCU Program (SAR 45, p. 18) Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report. 7/11/02 7 A05-B0035 Audit of Robert Morris College's Administration of the Talent Search, Upward Bound, and Student Support Services Programs Chicago, Illinois (SAR 45, p. 18) Status: Post Audit Group, OCFO expects to issue final audit determination letter by June 30, 2003. 9/27/02 $20,151 12 Office of the Chief Financial Officer (dealing with discretionary grants) Office of Special Education and Rehabilitative Services A06-B0028 Allowability of Office of Special Education and Rehabilitative Services' Grant Charges by Partners Resource Network, Inc., Beaumont, Texas (SAR 45, p. 19) Status: Post Audit Group, OCFO, and OSERS are requesting legal advice from OGC regarding issue raised by auditee. 5/23/02 $62,720 5 Office of the Chief Information Officer All-00008 The Department of Education's Implementation of the Government Information Security Reform Act (GISRA) Year 21 (SAR 45, p. 17) Status: Program office informed us that the audit is resolved. It will be removed in the next Semiannual Report. 9/16/02 26 Office of Elementary and Secondary Education A02-B0025 Puerto Rico Department of Education Did Not Administer Properly Three Contracts with R.V. Research and Management Group, Inc. (SAR 45, p. 18) Status: Status: A Department team is working on the resolution of this audit. 9/12/02 $2,146,023 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 (SAR 45, p. 18) Status: A final audit determination letter was scheduled to be issued by April 30, 2003. 9/17/02 $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 (SAR 45, p. 18) Status: Audit was placed on administrative stay on April 2, 2003. 8/2/02 $459,331 4 BEST COPY AVAILABLE 25 Semiannual Report To Congress: #46 'Table Cho Unresohged Reports Essued Polon° to October to 2002 (Cont.) Report Number Report 'title Date (Prior Semiannual Report IS 1RI Number and Page) Issued total NIonetar Findings No. of Recommen- dations 'A05-00012 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 (SAR 45, p. 18) Status: A final audit determination letter was scheduled to be issued by April 30, 2003. 9/18/02 $349,637 ... 9 Office of Special Education and Rehabilitative Services A02-80014 Audit of the Puerto Rico Vocational Rehabilitation Administration (PRVRA) (SAR 45, p. 18) Status: The program office is working on resolving this audit. 6/26/02 $15,800,000 5 Reported in Previous Semiannual Report Federal Student Aid A03-A0022 Audit of Commissioned Sales and Course Length at Wesley College (SAR 44, p. 14) Status: Audit was placed on administrative stay on January 29, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales and course length. 1/15/02 $1,431,560 5 A03-B0022 Audit of Wonderlic's Ability-to-Benefit Program (SAR 44, p. 14) Status: FSA/CFO is working in getting an approved final audit determination letter sent out. 2/5/02 4 A05-A0030 Audit of Commissioned Sales at Olivet Nazarene University (SAR 43, p. 11)* Status: Audit was placed on administrative stay on July 26, 2001. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales. 5/21/01 $3,299,891 4 A05-B0003 Audit of Commissioned Sales and Course Length at Benedictine University (SAR 44, p. 14) Status: Audit was placed on administrative stay on March 19, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales and course length. 12/13/01 $221,988 5 A05-B0004 Indiana Wesleyan University, Adult and Professional Studies Administration of Title IV Programs, Marion, Indiana (SAR 43, p. 11) Status: Audit was placed on administrative stay on October 24, 2002. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales and course length. 9/28/01 $31,682,782 5 A05-B0014 Audit of Course Length at Olivet Nazarene University (SAR 43, p. 12) Status: Audit was placed on administrative stay on October 24, 2001. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about course length. 9/28/01 4 A06-70005 Professional Judgment at Yale University (SAR 36, p.18) Status: Audit was placed on administrative stay on June 29, 2000. Awaiting a policy decision to address and resolve this finding in the final audit determination letter. 3/13/98 $5,469 3 A06-70009 Professional Judgment at University of Colorado (SAR 37, p.17) Status: Audit was placed on administrative stay on June 29, 2000. Awaiting a policy decision to address and resolve this finding in the final audit determination letter. 7/17/98 $15,082 4 26 BEST COPY AVAILABLE Office of Inspector General TILL (E: UolvesaDved Reports Essa.oed Polar to October 1, 2002 (Cont.) Report Number Report Title (Prior Semiannual Report ISARI Number and Page) Date Issued Total Monetary Findings No. of Recommen- dations A06-A0001 Interactive Learning Systems' Administration of the Title IV Student Financial Assistance Programs (SAR 43, p. 12) Status: Audit is still being reviewed by FSA Dallas Case Team. 7/20/01 $990,828 7 A06-A0003 International Business College's Administration of Title IV Student Financial Assistance Programs (SAR 42, p. 22) Status: Audit was placed on administrative stay on September 24, 2001. 3/28/01 $461,035 4 A06-B0012 Audit of Los Angeles City College's Compliance with the Title IV, Student Financial Assistance, Verification Requirements (SAR 44, p. 15) Status: Program office informed us that audit is resolved. It will be removed in the next Semiannual Report. 11/14/01 $14,072 3 A06-B0014 Audit of United Education Institute's Compliance with the Title IV, Student Financial Assistance, Verification Requirements (SAR 43, p. 12) Status: Audit is still being reviewed by the FSA San Francisco Case Team. 9/28/01 $7,285 1. A07-23545 State of Missouri, Single Audit Two Years Ended June 30, 1991 Status: Some of the findings involve political issues and require further discussions with the General Manager and Chief Operating Officer. 4/1/93 $1,048,768 18 A07-33123 State of Missouri, Single Audit Year Ended June 30, 1992 Status: Some of the findings involve political issues and require further discussions with the General Manager and Chief Operating Officer. 3/7/94 $187,530 18 A07-90035 Audit of Commissioned Sales at William Penn University (SAR 43, p. 12) Status: Audit was placed on administrative stay on August 1, 2001. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about commissioned sales. 5/15/01 $5,023,447 4 A07-B0001 Audit of Course Length at William Penn University (SAR 43, p. 12) Status: Audit was placed on administrative stay on October 24, 2001. FSA and OPE will be working with OGC on a settlement agreement with this school now that regulatory changes have been made about course length. 9/28/01 4 A09-70015 Associated Technical College (ATC) Eligibility of Institutions to Participate in Title IV Programs & Other Issues (SAR 37, p. 16) Status: Audit is still being reviewed by FSA San Francisco Case Team. 9/9/98 $8,600,000 7 N06-90010 Inspection of Parks College's Compliance with Student Financial Assistance Requirements (SAR 40, p. 18) Status: FSA Dallas Case Team denied school's recertification on December 31, 1999. School closed February 5, 2000. 2/9/00 $169,390 1 Office of the Chief Financial Officer (dealing with discretionary grants) 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, p. 21) Status: Post Audit Group, OCFO is awaiting college's response for additional data. 3/30/01 $1,621,861 2 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, p. 22) Status: A Department team is working on the resolution of this audit. 9/27/00 $181,305 18 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, p. 22) Status: A Department team is working on the resolution of this audit. 9/27/00 $82,452 17 27 BEST COPY AVAILABLE Semiannual Report To Congress: #46 TaNe Cho UhresoOved Reports Essued PG1OF to October I, .2002 (Cont.) Report Number Report Title (Prior Semiannual Report (SARI Number and Page) Date Issued Total Monetary Findings No. of Recommen- dations 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, p. 21) Status: A Department team is working on the resolution of this audit. 3/28/01 $7,841,493 14 A02-50200 The Puerto Rico Department of Education Must Institute a Time Distribution System (SAR 36, p. 13) Status: A Department team is working on the resolution of this audit. 11/14/97 1 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, p. 11) Status: Audit was placed on administrative stay on February 7, 2002. A Department team is working on the resolution of this audit. 9/28/01 $8,412,280 10 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, p.p. 11) Status: Audit was placed on administrative stay on January 15, 2002. The program office is working on resolving the audit findings. 7/25/01 $4,702,542 15 iRestricted Information. Note Status comments reflect documents received, comments agreed to, or comments provided by the Department. 7aMe E1111vesUgat5on Serv5ces CLOMLIDange Athons (October I., 2002 to March 3R, 2803) Summary of Investigation Subject Name Action This Period* Fines/ Restitutions Civil Recoveries INSTITUTIONAL FRAUD Collection Agency Fraud Officials of firm that contracted with 200 schools to collect defaulted Perkins loans used approximately $1.25 million in client trust funds for personal and general operating expenses Ronald Unger Sentenced: 10/1/02 $1,009,190 Arlene Unger Sentenced: 10/1/02 Donald Hess Sentenced: 10/1/02 Failure to Make Refunds/Refund Fraud College controller embezzled over $72,000 Zennia Hayes Convicted: 1/30/03 School owner failed to refund unearned FFEL proceeds Jeffrey Saleeby Sentenced: 2/26/03 $15,433 Instructing Students How to Falsify FAFSAs Former admissions representatives coached and assisted students to falsify their FAFSA to qualify them for $434,000 in Pell Grant funds for which they were not eligible Theresa Leon Indicted: 10/17/02 Irma Warren Indicted: 10/17/02 Former admissions representatives coached and assisted students to falsify their FAFSA to qualify them for $164,000 in Pell Grant funds for which they were not eligible Jaime Hurtado Indicted: 10/24/02 Maria Mena Indicted: 10/24/02 Henry Leger Indicted: 10/24/02 Former adminissions representatives coached and assisted students to falsify their FAFSA to qualify them for $263,000 in Pell Grant funds for which they were not eligible Andrea Garrote Indicted: 3/11/03 Maria Garcia Indicted: 3/11/03 Andrea Mongalo Indicted: 3/11/03 Enrollment of Ineligible Students Financial aid director submitted false documents enabling ineligible students to get over $1.3 million in Pell Grant funds Rochelle Shumpert Harris Sentenced: 11/7/02 $600,000 28 BEST COPY AVAILABLE Office of Inspector General T& Dc.. IInvesUgat5on Serykes Cumadath9e. AcUons (October ito 2002 to March 311, 2003) (Cont.) Summary of Investigation Subject Name Action This Period* Fines/ Restitutions Civil Recoveries Ineligible Program Debarred school owner used alias to open another school Carlos Alvarez Arrested: 12/19/02 Falsification of Attendance Director of business operations led file review process where school staff created false attendance records Cynthia Ghany Convicted: 10/8/02 Sentenced: 12/16/02 $120,000 Four former school officials defrauded Pell Grant program by creating false student attendance and grade records Patricia Donawa Sentenced: 12/19/02 $659,328 Kelvin Alexis Sentenced: 12/19/02 $659,328 Thomas Koons Sentenced: 12/19/02 Carlos Alvarez Sentenced: 12/19/02 $444,000 Falsification of GED or High School Diplomas Former school employee defrauded Pell Grant program by submitting false high school diplomas and other documents Barbara Henderson Convicted: 1/28/03 Sentenced: 1/28/03 $27,100 Admissions director created false GEDs and and diplomas to fraudulently enroll students Pamela Broome Sentenced: 2/14/03 $26,177 Fraudulent Work-Study Former Work-Study coordinator created false overtime cards and diverted funds to personal use Teresa Nethery Convicted: 12/19/02 Former professor falsified certified timesheets Roger Prolux Sentenced: 3/20/03 $62,785 $20,636 Falsification of Enrollment (Ghost Students) Individual posing as school owner fraudulently obtained more than $1.7 million in Pell Grants Carlos Alvarez Indicted: 1/28/03 Falsification of Entrance Exams Owner and employees of Michigan school defrauded the Mahmoud Younis Indicted: 1/15/03 Department of $875.000 in student financial aid funds Linda Johnson Indicted: 10/22/02 Convicted: 11/12/02 Ambrosio Santos Convicted: 12/22/02 Sentenced: 12/22/02 Civil Action:12/22/02 Walid Alsabbagh Indicted: 1/15/03 Jamal Mourtada Indicted: 1/15/03 Sahar Younes Indicted: 1/15/03 Muna Jaber Indicted: 1/15/03 Mariam Chbib Chbib Indicted: 1/15/03 Samira Mouzahem Indicted: 1/15/03 Gregory Moore Indicted: 10/24/02 Convicted: 1/21/03 School Employee Theft Former school official embezzled over $15,000 Samuel Padilla Arrested: 10/6/02 Convicted 1/16/03 Sentenced: 2/18/03 $15,103 Former school employee stole Pell Grant funds and deposited money in personal checking account Patrice Smith Indicted: 10/23/02 Convicted 2/3/03 Sentenced: 2/3/03 $6,831 BEST COPY AVAILABLE 29 Semiannual Report To Congress: #46 l'abOe EnvesUgat6on Serlikes CamnaDathfe AcUons (October to 2002 to March 3ni, 2003) (Cont.) Summary of Investigation Subject Name Action This Period* Fines/ Restitutions Civil Recoveries Assistant financial aid director fraudulently obtained $26,000 Linda Mrochinski Convicted: 11/20/02 Sentenced: 3/17/03 $28,097 in student aid Former college employee stole approximately $30,000 in Cynda Long Convicted: 1/31/03 student loan money School official defrauded FFEL program of more than Raymond Krull Sentenced: 10/2/02 $163,670 $200, 000 Former chief financial officer stole refund checks issued to ghost students Cedric Grant Sentenced: 2/28/03 $43,400 Former financial aid director submitted false loan applications Keith Magee Indicted: 3/18/03 Former school employees used false SSN to obtain aid Richelle Simpson Sentenced: 2/18/03 $287,500 Erick Simpson Sentenced: 2/18/03 University employee stole approximately $118,000 from school Glenda Lee Shirley Convicted: 2/6/03 Collusion Between Officials and Students Student involved in Pell Grant fraud Rachel Rodriguez Sentenced: 10/25/02 $2,268 Former financial aid official conspired to obtain more than $60,000 in Pell Grants for ineligible students Holly Clements- Chavira Indicted:12/06/02 Arrested: 12/10/02 RECIPIENT FRAUD Falsification of Income CIA Human Resource Director submitted false FAFSA Karen Northart Indicted: 10/17/02 Convicted: 10/28/02 Sentenced: 1/24/03 $8,500 Individual falsely claimed marital status to obtain aid David Seltzer Civil Action: 3/25/03 $15,851 Spouse assisted in falsifying FAFSA Wayne Northart Indicted: 10/17/02 Convicted: 10/28/02 Sentenced: 1/24/03 Former Chicago police officer submited false student aid applications William Lumpkin Sentenced: 1/9/03 $15,142 Cook County Illinois correction officer submitted false student aid application Delphine Bridges Sentenced: 1/10/03 $18,061 Individual under reported income Vetevely Stephons Convicted: 1/23/03 Student used identity of friend to obtain aid N. Lonnie Webster Convicted: 11/25/02 Sentenced: 2/11/03 $49,508 Student used deceased husband's name to obtain aid Donna Hites Sentenced: 2/20/03 Falsification of Identity/Identity Theft Individual defaulted on $39,000 in loans then used false identity and SSN to fraudulently get over $34,000 in loans Michael Wayne Jennings Indicted: 12/10/02 Arrested: 12/11/02 Individual used false identity to obtain $18,500 in student loans George Waters Convicted: 11/25/02 Sentenced: 1/28/03 $54,104 Illegal alien fraudulently used identity of U.S. citizen to obtain over $34,000 in student aid Rolando Lara Sentenced: 10/30/02 $34,954 Individual defaulted on student loans, then used another SSN to obtain more loans Michael Wildman Arrested: 10/22/02 Indicted: 10/22/02 Individual used false identity in check-cashing fraud Jamillah Allen Convicted: 11/5/02 Shonda Feggins Convicted: 11/5/02 30 BEST COPY AVAILABLE Office of Inspector General Tabge EnvesUgat5on SerAces Cumadath9e Act5ons (October it, 2002 to March 32.17 2003) (Cont.)* Summary of Investigation Subject Name Action This Period* Fines/ Restitutions Civil Recoveries Individual defaulted on student loans, then used false SSN to Willie Reed Indicted: 1/14/03 Convicted: 3/24/03 obtain more loans and grants Former MacArthur Scholar used false identity to obtain student aid Maria Bonner Sentenced: 1/23/03 $487,396 Former civilian U.S. Army employee used false social security numbers to obtain loans Hans Alagoa Convicted: 12/17/02 Sentenced: 2/27/03 $37,659 Falsification of Citizenship Individual obtained approximately $47,000 in Pell Grant and FFEL funds by falsifying citizenship on multiple applications Ruth Jean Baptiste Convicted: 10/2/02 Individual obtained over $31,000 in aid by claiming to be a U.S. citizen Alondra Patricia Ruiz Convicted: 10/3/02 Sentenced: 1/6/03 $31,566 Individual falsely claimed citizenship to obtain aid Themla Gener Indicted: 2/12/03 Falsification of Eligibility Individual on probation for federal crime submited false GED to fraudulently obtain $10,000 in loans Robert Donahue Arrested: 12/10/02 Convicted: 1/17/03 Foreign School Recipient Fraud Two individuals conspired with fraud ring to obtain $146,500 Harold Pierre- Indicted: 3/4/03 Louis Max Noel Indicted: 3/4/03 Fraudulent Work-Study Former student stole over $6,000 in Work-Study funds by submitting forged time sheets Jessica Hook Convicted: 10/16/02 Student forged Federal Work-Study time cards Sohrab Attai Arrested: 10/18/02 Indicted: 11/22/02 Convicted: 12/18/02 Sentenced: 12/18/02 $1,895 Fraudulent Loan Discharges/Deferments U.S. Postal Service employee forged doctor's signature to fraudulently cancel student loan debt Tonya Ryans Indicted: 11/13/02 Individual submitted false claims for deferment of loan payments David Venezia Civil Settlement: 10/31/02 $55,000 Fraudulent. Online Schooling Prison inmate submitted false form for himself and other inmates to obtain student aid for online courses Avangia Jones Arrested: 12/3/02 Other Individual stole over $78,000 to pay student loans for her husband and son Ann Glasthal Sentenced: 10/17/02 $78,179 Individual reported checks stolen to obtain aid Terrance Leonard Kenner Arrested: 3/5/03 FINANCIAL AID PREPARER FRAUD Clients Prosecuted Client paid a financial aid consultant to falsify financial aid forms and federal tax returns to obtain student aid for her daughter Dorothy Stephens Sentenced: 11/27/02 $23,410 BEST COPY AVAILABLE 31 Semiannual Report To Congress: #46 TagAe 770 HnvesUgaUon SeMces Cunndat5ve Acidons (October 1, 2002 t© March 32. 2003) (Cont.) Summary of Investigation Subject Name Action This Period* Fines/ Restitutions Civil Recoveries Chicago teacher falsified financial aid forms and federal income tax returns to obtain student aid for her child and used fraudulent preparer to create false documents Lloyd Norman Convicted: 1/29/03 Clients of preparer falsified aid applications Edna Clemons Sentenced: 3/18/03 $16,280 Neely Clemons Sentenced: 3/18/03 $16,280 Preparers Prosecuted Consultant advised and assisted families in preparing and submitting false FAFSAs Ozel Clifford Brazil Indicted: 10/31/02 Convicted: 2/21/03 NON-TITLE IV PROGRAM FRAUD Individual illegally diverted $900,000 in Impact Aid Stateson Francois Arrested: 10/23/02 Former director of AIDS foundation embezzled $72,000 in foundation funds Silma Magaz- Escoda Gonzalez Convicted: 10/8/02 Sentenced: 1/20/03 $74,100 Former Secretary and Associate Secretary of Education for Puerto Rico involved in six-year corruption and extortion involving Department funds Victor Fajardo Velez Sentenced: 12/11/02 $4,300,000 Jose Omar Cruz Mercado Sentenced: 12/11/02 $600,000 Rupert() Vazquez Lopez Sentenced: 12/12/02 $800,000 Maria Ramos Matos Sentenced: 12/12/02 $123,000 Individual embezzled Vocational Rehabilitation funds Bruce Waite Sentenced: 10/21/02 $285,568 Former administrative assistant to an Oklahoma school district treasurer fraudulently obtained checks drawn on school district's various funds Mellissa Schrick Sentenced: 2/27/03 $261,959 Former Title III Director at Clark Atlanta University embezzled Title III funds Robbie Bateman Convicted: 3/11/03 Former employees of Florida Vocational Rehabilitation Services fraudulently obtained VRS benefits for their sons Michelle Abrajano Indicted: 3/25/03 Jerald Means Indicted: 3/25/03 Twanda Ross Indicted: 3/25/03 Four officials of the Massachusetts Career Development Gerald Phillis Indicted: 3/27/03 Institute defrauded the State education agency and obstructed Giuseppi Polemeni Indicted: 3/27/03 justice Jamie Dwyer Indicted: 3/27/03 Luisa Cardaropoli Indicted: 3/27/03 INTERNAL INTEGRITY Department employee possessed child pornography on government computer Robert Jamroz Indicted: 1/28/03 Convicted: 2/27/03 Department contractors involved in over $1 million electronic equipment and overtime fraud case William Cousin Sentenced: 1/23/03 $5,760 Joseph Morgan Sentenced: 1/23/03 $2,928 Employees of Verizon Federal involved in over $1 million Verizon Federal, Inc. Civil Settlement: 2/6/03 $2,000,000 electronic equipment and overtime fraud case Former Department employee involved in over $1 million electronic equipment and overtime fraud case Raymond Morgan Jr. Sentenced: 1/7/03 32 BEST COPY AVAILABLE Office of Inspector General Tabge 72 HnvesUgaMon Serulces CanninoDathye Acthms (October ar 2002 to March 3ar 2003) (Cont.) Summary of Investigation Subject Name Action This Period* Fines/ Restitutions Civil Recoveries Department employees illegally charged over $163,000 on Jean Williams Stancell Convicted 1/22/03 government credit cards Silvador Denise Estep Convicted: 2/21/03 Department employees and others involved in over $1 million David "Dinky" Gray Sentenced: 10/10/02 electronic equipment and overtime fraud case Elizabeth Burroughs Gray Sentenced: 10/10/02 Luther Mellen III Convicted: 11/8/02 Philip Burroughs Convicted: 11 /8/02 Jeffrey Morgan Convicted: 11/8/02 Joanne Burch Sentenced: 11/23/02 Tina Burroughs Sentenced: 11/15/02 Lewis Morgan Sentenced: 3/14/03 Joanne Murphy Sentenced: 11/15/02 Susan Morgan Sentenced: 1/23/03 Marianne Buckler Sentenced: 1/23/03 $2,928 Robert Sweeney Sentenced: 1/23/03 * Arrest refers to filing of criminal complaint, indictments include informations, and convictions include pretrial diversions and nolo pleas. BEST COPY AVAILABLE 33 Semiannual Report To Congress: #46 tab[le Stat5stka Profile: October Lo 2002 to March 32.t, 2003 Six-month Period Ending 3/31/03 OIG AUDIT REPORTS ISSUED 27 Questioned Costs $136,191,976 Unsupported Costs $3,450,956 Recommendations for Better Use of Funds $0 OTHER OIG PRODUCTS 28 (Inspections, Action Memoranda, Alert Memoranda, Closeout Letters, Management Information Reports, and Special Projects) OIG AUDIT REPORTS RESOLVED BY PROGRAM MANAGERS 26 Questioned Costs Sustained $46,435,865 Unsupported Costs Sustained $3,402,591 Additional Disallowances Identified by Program Managers $8,532,659 Management Commitment to the Better Use of Funds $0 INVESTIGATIVE CASE ACTIVITY Cases Opened 82 Cases Closed 120 , Cases Active at End of Period 354 Prosecutorial Decisions 79 -Accepted 51 -Declined 28 INVESTIGATION RESULTS Indictments/Informations 481 Convictions/Pleas 432 Fines Ordered $22,002 Restitution Payments Ordered $11,704,360 Civil Settlements/Judgments (#) 62 Civil Settlements/Judgments ($) $3,153,917 Recoveries $408,243 'Includes four actions not previously reported. 2lncludes two actions not previously reported. BEST COPY AVAILABLE 34 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 35 U.S. Department of Education Office of Educational Research and Improvement (OERI) National Library of Education (NLE) Educational Resources Information Center (ERIC) NOTICE Reproduction Basis Efitadlual Remoras lalumalla Cola This document is covered by a signed "Reproduction Release (Blanket)" form (on file within the ERIC system), encompassing all or classes of documents from its source organization and, therefore, does not require a "Specific Document" Release form. This document is Federally-funded, or carries its own permission to reproduce, or is otherwise in the public domain and, therefore, may be reproduced by ERIC without a signed Reproduction Release form (either "Specific Document" or "Blanket"). EFF-089 (1/2003)