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Recent events have increased concerns about the potential for fraud in student loan programs related to loans for U.S. residents attending foreign schools. In 2002 the Office of Special Investigations of the General Accounting Office (GAO) created a fictitious foreign school that the Department of Education subsequently certified as eligible to participation in the student loan program. GAO investigators subsequently obtained approval for student loans totaling $55,000 on behalf of three fictitious students. This investigation and other data reveal that the Federal Family Education Loan Program (FFELP) is vulnerable to fraud, waste, and abuse in several ways. The GAO recommends that the Department of Education develop on-line training resources specifically designed for foreign school officials and that it undertake a risk assessment to determine how best to ensure accountability while considering costs, burden to schools and students, and access to foreign schools. Two appendixes describe characteristics of foreign schools participating in the FFELP and contain comments from the Department of Education. (SLD)

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)

This testimony summarizes a report generated by the U.S. General Accounting Office concerned with internal control problems found in the U.S. Department of Education. Significant internal control weaknesses in the U.S. Department of Education's payment processes and poor physical control over its computer assets made the department vulnerable to (and in some cases resulted in) fraud, improper payments, questionable purchases, and lost assets. These weaknesses have affected the U.S. Department of Education's ability to provide reliable financial information to decision-makers both inside and outside the agency and to maintain the financial integrity of its operations. Several instances of fraud were identified in the grant and loan areas, and pervasive control breakdowns and improper payments in other areas, particularly involving purchase cards. Ineffective controls were identified in the third-party draft process, so the U.S. Department of Education eliminated their use. Until the U.S. Department of Education takes further action to strengthen its internal controls over Pell Grants, purchase cards, and computer equipment, it will continue to be susceptible to fraud, waste, abuse, and mismanagement in these areas. (RT)

This report to Congressional Requesters is concerned with internal control problems found in the U.S. Department of Education. Significant internal control weaknesses in the U.S. Department of Education's payment processes and poor physical control over its computer assets made the department vulnerable to (and in some cases resulted in) fraud, improper payments, questionable purchases, and lost assets. These weaknesses have affected the U.S. Department of Education's ability to provide reliable financial information to decision-makers both inside and outside the agency and to maintain the financial integrity of its operations. Instances of fraud were identified in the grant and loan areas, and pervasive control breakdowns and improper payments in other areas, particularly involving purchase cards. Ineffective controls were identified in the third-party draft process, so the U.S. Department of Education eliminated their use. Recommendations include conducting onsite investigations at institutions where improper disbursements of Pell Grants were found; implementing an effective review-and-approval process to ensure that approving officials are adequately trained in and knowledgeable of their disbursement duties and responsibilities; and enhancing security procedures over computer storage rooms. Appendices contain descriptions of grant and loan programs reviewed; review objectives, scope, and methodology; comments from the Department of Education; and General Accounting Office contact information and staff acknowledgements. (RT)

This document discusses the Department of Education's (DOE) fiscal year 1999 financial audit results; the relationship between the audit findings and the potential for waste, fraud, and abuse; and the results of the General Accounting Office's (GAO) review of the DOE's grantback account. The DOE's financial activity is important to the federal government because Education is the primary agency responsible for overseeing the more than $75 billion annual federal investment in support of education programs. The DOE is also responsible for collecting about $175 billion owed by students. In fiscal year 1999, more than 8.1 million students received over $53 billion in federal student financial aid through programs administered by the DOE. The DOE's stewardship over these assets has been under question as the agency has experienced persistent financial management weakness, beginning with its first agencywide financial audit effort in fiscal year 1995. Each year, DOE auditors have reported largely the same serious internal control weaknesses, which have affected the ability to provide reliable financial information to decision makers both inside and outside the agency. (DFR)

This report from the Department of Education's (ED) Office of Inspector General (OIG) examines information-systems technology, financial systems and controls, and postsecondary education in the ED. The review focuses on postsecondary schools, lenders, and guaranty agencies. Significant investigative efforts revealed that fraud had been committed by student financial-aid consultants, by students, and by individuals falsely claiming enrollment at foreign schools. The report discusses implementation-readiness reviews of ED's Grants Administration and Payment System, describes how ED's Year 2000 efforts have not kept pace with government milestones, outlines how ED received an unqualified opinion on its FY 1997 annual financial statement, and details an ongoing investigation of various forms of financial fraud committed against ED. Other significant activities revealed in the report describe efforts to comply with the Government Performance and Results Act, which requires federal agencies to prepare a 5-year strategic plan and annual performance plans; direct loan school monitoring; and audit-quality initiatives. Two abstracts offer further information on significant audits and audit-related activities and important prosecutive actions resulting from OIG Investigations. Six statistical tables provide data on recommendations described in previous reports that have not been completed, on unresolved reports, and other information. (RJM)

This report from the Department of Education's (ED) Office of Inspector General (OIG) focuses on ED's information technology and Year 2000 readiness. It also reviews elementary and secondary education and student financial-assistance programs to ensure that ED programs are administered with efficiency, effectiveness, and integrity. A review of ED's information technology showed that ED made significant progress in preparing for the Year 2000 and has reported that all mission-critical systems were renovated, tested, and implemented by March 31, 1999. The review also revealed that security in the Grants Administration and Payment System was enhanced and that ED's management of the system-development process could be improved. The audit highlights efforts associated with reauthorization of the Elementary and Secondary Education Act and the proposed Education Flexibility Partnership Act of 1999; assessments in student- financial assistance, including a study of cost issues in federal-loan programs; results from a congressional initiative to improve federal management; and audit-resolution practices and quality initiatives, such as the Cooperative Audit Resolution and Oversight initiative, which is a collaborative method whereby states and the ED work together to solve recurring problems. Two abstracts list significant audits and audit-related activities and important prosecutive actions resulting from OIG investigations. (RJM)

This report assesses the extent to which ineligible noncitizens receive postsecondary federal student financial assistance. The study focused on the following issues: (1) processes needed to ensure that ineligible noncitizens do not receive federal student aid under Title IV of the Higher Education Act, (2) the numbers of potentially ineligible persons identified through these processes, and (3) the degree to which ineligible noncitizens are receiving aid despite these processes. Social Security Administration records are used to screen for U.S. citizenship and Immigration and Naturalization Service records are used to screen noncitizens. The Department of Education believes that the process works reasonably well; however, responsibility for identifying ineligible applicants is shared by the Department of Education and by the above named institutions. Two types of matches are used to identify potentially ineligible applicants. If the Department questions an applicant's eligibility, the college financial aid administrators are required to resolve the eligibility. Although no comprehensive studies on financial aid to ineligible persons have been done, no cases of fraud have been brought before the Office of the Inspector General since the current process was implemented in 1996. (CH)

The purpose of this hearing was to probe a pattern of fraud and abuse in the Pell Grant Program for postsecondary students, focusing specifically on the IADE American Schools, a for-profit vocational school with campuses in the Los Angeles (California) area and serving primarily Hispanic students. In his opening remarks Senator Roth detailed a history of prior abuses of the program and lax oversight by the Department of Education. Senator Nunn, after summarizing a five-year series of hearings, reports, and recommendations, testified that a year-long investigation of the IADE schools had uncovered serious misconduct, abuses, and possibly fraudulent practices. He charged that the Department was not only incapable of preventing a fraudulent institution from participating in student aid programs but was also unable to detect or pursue such fraudulent activities. Following the senators' opening statements, the Subcommittee team investigating IADE schools reported its findings. David Longanecker, Assistant Secretary for Postsecondary Education, then reviewed the Department's procedures and policies, stating that oversight was being improved. The final testimony was a report from the U.S. General Accounting Office assessing the Department's effectiveness in using student aid data to ensure compliance and prevent abuses. An appendix contains the texts of the witnesses' prepared statements. 56 exhibit statements are listed separately. (CH)

This report examines the U.S. Department of Education's Federal Family Education Loan Program (FFELP) and Federal Pell Grant Program (FPGP), focusing on the extent to which the Department's student aid data are effectively used to help ensure compliance with federal requirements and prevent any abuses from recurring and the improvements that the Department has planned or made to its student aid systems. Data indicate that 43,519 ineligible students may have received 58,105 loans, totaling over $138 million, for fiscal years 1982 through 1992, and that more than 48,000 students may have received overpayments of their Pell grants for award years 1989 through 1993. The report describes some of the improvements put into place by the Department, such as the National Student Loan Data System, to help correct these abuses, as well areas needing further improvement to help prevent fraud and abuse. Six appendixes provide information on the scope and methodology of the study, the process for applying for federal student financial aid, guaranty agencies that guaranteed loans to ineligible students, comments from the Department of Education, General Accounting Office (GAO) contacts, and staff acknowledgements. A list of 11 related GAO publications is included. (MDM)

These hearing transcripts present testimony on the high risks and emerging fraud in several areas of the federal government, including the Student Loan Program of the Education Department (ED), the Multifamily Housing Program of the Department of Housing and Urban Development (HUD), and Internal Revenue Service (IRS) tax return filing. Testimony was heard from concerned senators and government officials responsible for risk management and fraud in these departments and agencies. Current and possible solutions to risk management and fraud were discussed. Opening and/or prepared statements were given by: Senators John Glenn, Byron L. Dorgan, Jim Sasser, William S. Cohen, and William V. Roth, Jr. Testimony was heard from: (1) the special assistant to the comptroller general and the director of tax systems issues, General Accounting Office (GAO); (2) the commissioner, deputy commissioner, and other officials of the IRS; (3) the deputy secretary, inspector general, and other officials of ED; and (4) the inspector general, assistant inspector general for audit, and other officials of HUD. An appendix contains the prepared statements of several witnesses, along with written questions and answers from officials of GAO, ED, HUD, and the Department of Treasury. (MDM)

This report presents information on an ongoing investigation into Pell Grant Program abuses among parochial yeshiva-operated institutions in the New York City area. The investigation examined 23 yeshivas (Orthodox Jewish schools of higher instruction in Jewish learning) or yeshiva-operated institutions for fraudulent or abusive conditions and subpoenaed all documents of 5 yeshivas, interviewed students and officials, reviewed student files, and did forensic analysis of documents. Some evidence of abuses was found including "ghost students" who never applied for Pell Grants; individuals who never enrolled or attended the yeshivas that used their names; ineligible high school students and individuals whose biographical information was sold to yeshivas by "brokers" for use in obtaining Pell Grants; and use of mail drops other than home locations to receive Pell grant applications. The investigation also found that a purported college offering an Associate of Arts degree with course requirements across several disciplines in fact offered students only English classes and a small complement of Jewish history and culture. This program and others had very high withdrawal rates, making them ineligible to participate in the Pell program. Finally, one institution had falsified eligibility documents for an Israel-based campus. Appendixes contain information on investigation methodology, the Pell Grant Program and a case study. (JB)

This report on abuses in federal student aid programs, particularly the Guaranteed Student Loan Program (GSLP), is based on information gathered by the Senate Permanent Subcommittee on Investigations in the course of its overall investigation and the testimony and exhibits received during the course of hearings held between February and October, 1990. The hearings, taking place over 8 days, involving nearly 50 witnesses, and dealing with the overall GSLP status, were organized around case studies, specifically: The American Career Training Corporation of Pompano Beach, Florida; The Culinary School of Washington, D.C.; and the collapse of the First Independent Trust Company of Sacramento, California. This investigation was prompted by a large volume increase in the program, a dramatic increase in loan defaults, and reports of waste, fraud and abuse within the GSLP. In four sections the following topics are addressed: the nature and extent of the program (GSLP growth, business over education, industry profits, problem schools, students as victims); the existence of serious problems at all levels (school practices, state licensure, accreditation, financial players); the dismal record of the U.S. Department of Education (failures to monitor eligibility and certification, accrediting agency recognition, financial player regulation/oversight, administration/management, enforcement). A final section offers findings, conclusions, and recommendations. (JB)

This document presents oral testimony and prepared statements on the subject of federal student loan programs identified as particularly vulnerable to fraud, waste, and abuse. Opening statements by the four Senators (Nunn, Kohl, Roth, and Levin) stress the seriousness of increasing student loan defaults and abuses by proprietary, for profit, trade schools. Oral testimony and exchanges with the Senators are then given for the following individuals: Franklin Frazier, Director, Education and Employment Issues of the General Accounting Office; David B. Buckley, Chief Investigator of the Permanent Subcommittee on Investigations; James B. Thomas, Inspector General, Department of Education; two students, an employee, and the president of the American Career Training School. Much of the document consists of exhibits pertaining to the American Career Training Travel School (Florida) investigation and related documents concerning proprietary trade schools including a statement by the National Association of Trade and Technical Schools. (DB)

This document reports oral testimony and prepared statements of persons who testified at hearings on abuses in federal student aid programs. Witnesses included proprietary school owners, officials from accrediting bodies and other educational organizations. Their testimonies focused on the various problems and discrepancies occurring within the federally guaranteed student loan program, and specifically, the Triad system of state accreditation/certification involving self regulation by industry, eligibility conferred by the U.S. Department of Education on trade and proprietary schools, and the victimization of proprietary students by school owners. (LPT)