Other Information
OTHER INFORMATION

114 FY 2016 Agency Financial Report—U.S. Department of Education 

About the Other Information Section 

The Other Information section includes: 

 improper payments reporting details, 

 the schedule of spending, 

 a summary of assurances, 

 a summary of the Office of Inspector General’s (OIG’s) view on the Department’s

management and performance challenges for fiscal year (FY) 2017, 

 freeze the footprint information, and 

 civil monetary penalty inflation adjustment information. 

Improper Payments Reporting Details 

The Improper Payments Reporting Details summarize the Department’s efforts to prevent, 

detect, and recover improper payments. It includes data regarding the Department’s high 

risk programs, estimates of improper payments, root causes and corrective actions to 

mitigate improper payments and recoveries of improper payments. 

Combined Schedule of Spending 

The Schedule of Spending (SOS) presents what money was available to spend, how the 

money was spent, and who the money went to for the fiscal years ended September 30, 

2015 and 2016. More information on the Department’s spending can be found at 

USAspending.gov, a searchable website that provides information on federal awards and is 

accessible to the public at no cost. 

Summary of Financial Statement Audit and Management 

Assurances 

The Summary of Financial Statement Audit and Management Assurances provides 

information on any material weaknesses reported by the agency or through the audit 

process. The Department reported that it had not identified any material weaknesses in 

FY 2016.

Office of Inspector General’s Management and Performance 

Challenges 

The OIG’s Management and Performance Challenges Report summarizes the 

Department’s challenges for FY 2017. The OIG identified the following five challenges: 

(1) Improper Payments, (2) Information Technology Security, (3) Oversight and Monitoring, 

(4) Data Quality and Reporting, and (5) Information Technology System Development and 

Implementation. The full report is available at the OIG website. 

Freeze the Footprint 

The Freeze the Footprint summarizes the Department’s efforts to comply with Office of 

Management and Budget (OMB) Management Procedures Memorandum 2013-02, the 

Freeze the Footprint policy implementing guidance. That guidance directs that all Chief 

Financial Officers Act of 1990 departments and agencies shall not increase the total square 

footage of their domestic office and warehouse inventory compared to an FY 2012 

baseline. 
OTHER INFORMATION

FY 2016 Agency Financial Report—U.S. Department of Education 115

Improper Payments Reporting Details 

OMB Circular A-123, Appendix C, Requirements for Effective Estimation and Remediation 

of Improper Payments, implements the provisions of the Improper Payments Information 

Act of 2002, as amended by the Improper Payments Elimination and Recovery Act of 2010

(IPERA), and the Improper Payments Elimination and Recovery Improvement Act of 2012

(IPERIA), and directs federal agencies to review and assess all programs and activities 

they administer and identify those determined to be susceptible to significant improper 

payments. Significant improper payments are defined as those in any particular program 

that exceed both 1.5 percent of program payments and $10 million annually, or that exceed 

$100 million. 

The Department determined that the Pell Grant and Direct Loan programs were susceptible 

to significant improper payments risk based on the OMB Circular A-123, Appendix C, 

definition. The Department also determined these two programs were susceptible to 

improper payments risk based on the last risk assessments performed in FY 2014, as 

described in the Risk Assessment subsection. In FY 2016, the Pell Grant and Direct Loan 

programs continued to be susceptible to significant improper payments. Furthermore, the 

Pell Grant and Direct Loan programs were designated by OMB as high-priority programs in 

2011 and 2015, respectively. The Department continues to address the requirements to 

comply with reporting on the Pell Grant and Direct Loan programs as risk susceptible and 

high-priority programs. Details on improper payment estimates and reduction targets for 

both programs are included within the Improper Payment Reporting subsection. 

As described in the Analysis of Systems, Controls, and Legal Compliance section, despite a 

robust internal controls framework, including controls intended to estimate, prevent, detect, 

and recover improper payments, the OIG reported that the Department was not compliant 

with IPERA because the FY 2015 improper payment rate did not meet the annual reduction 

target for the Direct Loan program. The full report, including the Department’s response, is 

available for review at the OIG website. The Department convened a workgroup with OIG 

and OMB participation to evaluate and recommend improvements to the FY 2016 

estimation methodology, and develop proposed corrective actions in response to the 

FY 2015 IPERA Compliance Audit Report. The outcome of the workgroup included 

revisions to the FY 2016 estimation methodology to address the findings, and to make 

additional enhancements to the methodology as described in the Improper Payment 

Sampling and Estimation Methodology subsection. 

Programs Description 

Pell Grant 

The Pell Grant program, authorized under Title IV of the Higher Education Act of 1965 

(HEA), provides need-based grants to low-income undergraduate and certain 

postbaccalaureate students to promote access to postsecondary education. 

Direct Loan 

The Direct Loan program, added to HEA in 1993 by the Student Loan Reform Act of 1993, 

authorizes the Department to make loans through participating schools to eligible 

undergraduate and graduate students and their parents. 
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116 FY 2016 Agency Financial Report—U.S. Department of Education 

Title I 

The Title I program, authorized by the Elementary and Secondary Education Act of 1965,

as amended by the No Child Left Behind Act of 2002 and the Every Student Succeeds Act 

of 2015, ensures that all children have a fair, equal, and significant opportunity to obtain a 

high-quality education and reach, at a minimum, proficiency on challenging state academic 

achievement standards and state academic assessments. 

Risk Assessment 

As required by OMB A-123, Appendix C, the Department assesses the risk of improper 

payments at least once every three years for each program that is not already reporting an 

improper payments estimate. Detailed information on the risk assessment process and 

results is included within this subsection. A summary of the assessment is presented in the 

Risk Assessment Results table below. 

Risk Assessment Results 

Program

Last Risk 

Assessment 

RiskSusceptible? 

Federal Student Aid-Managed Programs 

Federal Pell Grant FY 2014 Yes

The Teacher Education Assistance for College and Higher 

Education Grant FY 2014 No

Federal Supplemental Educational Opportunity Grant FY 2014 No

Iraq and Afghanistan Service Grant FY 2014 No

Federal Perkins Loan Program FY 2014 No

Federal Direct Loan Program FY 2014 Yes

Federal Family Education Loan Program FY 2014 No

Federal Work-Study Program FY 2014 No

Health Education Assistance Loan Program FY 2015 No

Other Department Programs

Title I FY 2016 No

Other Grant Programs FY 2016 No

Contract Payments FY 2016 No

Administrative Payments FY 2014 No

Federal Student Aid-Managed Programs 

During FY 2014, a risk assessment was performed on all Federal Student Aid (FSA)-

managed programs, with the exception of the Health Education Assistance Loan (HEAL) 

program. The HEAL program was transferred from the U.S. Department of Health and 

Human Services to FSA on July 1, 2014, and a risk assessment was subsequently 

performed in FY 2015. 
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FY 2016 Agency Financial Report—U.S. Department of Education 117 

For all FSA-managed programs, risk assessment meetings were held with program owners, 

key personnel, and other designees to discuss the inherent risk of improper payments 

according to the following 10 risk factors: 

 Newness of Program or Transactions; 

 Complexity of Program or Transactions; 

 Volume of Payments; 

 Level of Manual Intervention; 

 Changes in Program Funding Authorities, Practices, and Procedures; 

 History of Audit Issues; 

 Prior Improper Payments Reporting Results; 

 Human Capital Management; 

 Nature of Program Recipients; and 

 Management Oversight. 

Process owners assigned a rating to each risk factor based on their detailed understanding 

of the programs and risk of improper payments. Weighted percentages were assigned to 

each risk factor rating based on a judgmental determination of the direct or indirect impact 

on improper payments. An overall risk score was then computed for each program, 

calculated by the sum of the weighted scores for each risk factor and overall rating scale. 

Based on risk assessments conducted in FY 2014 and FY 2015, the Department 

determined that the Pell Grant and Direct Loan programs were susceptible to risk of 

significant improper payments. 

According to OMB Circular A-123, Appendix C, if a program has previously been identified 

as susceptible to improper payments, but has documented at least two consecutive years 

of improper payments that are below the IPERA threshold, the agency may request relief 

from the annual reporting requirement for this program. The Federal Family Education Loan 

(FFEL) program reported improper payment estimates below the statutory threshold during 

FY 2013 and FY 2014. On August 4, 2015, OMB approved the Department’s request, with

OIG’s concurrence, for relief from improper payments reporting for the FFEL program. 

Accordingly, the Department has formally reclassified the FFEL program as not susceptible 

to significant improper payments. 

In FY 2016, it was confirmed that there were no significant changes in legislation and/or 

increases in funding necessitating reassessment of programs’ risk susceptibility. As a 

result, risk assessments for FSA-managed programs will next be performed in FY 2017. 

Other Department Programs 

In 2014, the Department completed a risk assessment on administrative payments to 

employees in accordance with IPERIA. These payments were inclusive of FSA. The areas 

of administrative payments that were examined include: Salary/Locality Pay, Travel, 

Purchase Cards, and Transit Benefits. The analysis included a review of actual recaptured 

payments versus total outlay for each of the related payment areas and the likelihood of 

payment errors. The Department determined that administrative payments to employees 
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118 FY 2016 Agency Financial Report—U.S. Department of Education 

were not susceptible to significant improper payments. Administrative payments risk 

assessment will next be performed in FY 2017. 

The Department conducted a risk assessment of contract payments in FY 2013. During 

FY 2016, the Department reassessed the risk of improper payments on contract payments, 

including contracts managed by FSA, as required by OMB Circular A-123, Appendix C. 

Given robust internal controls, the Department continues to experience an extremely low 

volume of improper payments in contracts; as such, the assessment found contract 

payments are not susceptible to significant improper payments. 

The Department conducted risk assessments of all non-FSA managed grant programs in 

FY 2013. During FY 2016, the Department reassessed the risk of improper payments on all 

non-FSA-managed grant programs. While there is inherent risk that grant recipients may 

fail to adequately document expenditures or expend funds on unallowable activities, the 

FY 2016 assessments determined that none of the other grant programs were susceptible 

to significant improper payments. The analysis included a quantitative review of questioned 

costs from Single Audit findings versus total program expenditures, as well as a qualitative 

review of other risk factors including changes in legislation or regulations and history of 

audit findings. The list of all programs assessed in FY 2016 can be located here. 

The non-FSA grant programs assessed in FY 2016 include Title I, which was not found to 

be susceptible to significant improper payments. During FY 2016, the Department 

requested relief, with OIG’s concurrence, from reporting Title I estimates on improper 

payments since it demonstrated that the program had more than two consecutive years of 

improper payments reporting below the IPERA thresholds. OMB approved the 

Department’s request on March 4, 2016, with the caveat that a risk assessment be 

conducted in both FY 2016 and FY 2017 to ensure that the enactment of the Every Student 

Succeeds Act has not caused the Title I program to become susceptible to significant 

improper payments. Given the Department’s plan and timeline for implementing the Every 

Student Succeeds Act, the Department did not find the new legislation to increase the risk 

of improper payments for Title I in FY 2016 to a significant level. 

Sampling and Estimation Methodology

On September 17, 2014, the Department obtained approval from OMB to use an alternative 

methodology for estimating improper payments for the Pell Grant and Direct Loan 

programs. The alternative methodology leverages data collected through FSA Program 

Reviews, which include procedures such as determining whether schools properly 

performed verification of students’ self-reported income, identifying conflicting applicant 

data, student academic performance, and eligibility on the disbursed funds for a sample of 

students in each review. The alternative methodology, although it does not use statistical 

sampling techniques, provides for a more efficient allocation of resources by integrating 

the estimation methodology into core FSA monitoring functions. The Department 

determined that it would be too costly and inefficient, and significantly increase the 

burden on schools and students, to develop a rigorous statistical sampling methodology 

that would provide a very tight precision rate (such as providing no more than 0.1 percent 

over the established target as prescribed by OMB). The methodology, including updates to 

address findings from the OIG’s FY 2015 IPERA Compliance Audit Report, is described in 

detail on the Department’s improper payments website. 
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FY 2016 Agency Financial Report—U.S. Department of Education 119 

On June 30, 2016, the Department submitted updates to the alternative sampling plan and 

estimation methodology to OMB for approval in response to findings from the OIG’s 

FY 2015 IPERA Compliance Audit Report, U.S. Department of Education’s Compliance 

with Improper Payment Reporting Requirements for Fiscal Year 2015. In its report, OIG 

noted that the prior estimation methodology did not include all improper payments in the 

calculation of the estimates, such as improper payments resulting from recipients 

submitting inaccurate self-reported income on the Free Application for Federal Student Aid 

(FAFSA), all improper payments resulting from schools disbursing Pell Grant and Direct 

Loan funds to students enrolled in ineligible programs or students attending ineligible 

locations, and other improper payments not identified in Program Reviews. The OIG also 

noted that the prior estimation methodology was susceptible to volatility and potential 

inordinate impact of a single improper payment finding, and does not account for Program 

Reviews that do not reach the Program Review Report stage in time for inclusion in the 

estimated improper payment rates. The Department updated its methodology for FY 2016 

to address these findings and to make additional enhancements. These updates include: 

incorporation of misreported income over- and under-payment estimates from the 

FAFSA/IRS Data Statistical Study into the Pell Grant improper payment rate to address 

improper payments associated with inaccurate self-reported income on the FAFSA; 

inclusion of Pell Grant and Direct Loan funds improperly disbursed to students enrolled in 

ineligible programs or at ineligible locations within the Pell Grant and Direct Loan improper 

payment rates; and expansion of the population of Program Reviews eligible for review. 

OMB approved the Department’s updates to the alternative sampling plan and estimation 

methodology on October 14, 2016. 

The Department acknowledges that its alternative estimation methodology can lead to 

volatile improper payment estimates. Although the sample size has increased year-overyear, there continues to be variability in the improper payment estimates. This is largely due 

to fewer program reviews being conducted at lower-risk schools. This category of schools 

accounts for a large portion of the Direct Loan and Pell Grant program disbursements. As a 

result, the potential exists for student-level test results of a single observation (such as a 

single student or school) at lower-risk schools to significantly influence the improper 

payment estimates, resulting in volatility of the model.
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IMPROPER 

PAYMENTS 

REPORTING 

DETAILS

120 FY 2016 Agency Financial Report—U.S. Department of Education 

Improper Payment Reporting 

Table 1. Improper Payment Reduction Outlook 

(Dollars in Millions) 

Program 

or 

Activity 

PY Outlays (1)PY IP % (2)PY IP $ (2)CY Outlays (3)CY IP % (4)CY IP $ (4) CY Overpayment $ CY Underpayment $ CY + 1 Est. Outlays (5)CY + 1 Est. IP % (6)CY + 1 Est. IP $ CY + 2 Est. Outlays (5)CY + 2 Est. IP % (6)CY + 2 Est. IP $ CY + 3 Est. Outlays (5) CY + 3 Est. IP % (6)CY + 3 Est. IP $ 

Pell Grant 29,909.28 1.88 562.29 28,188.55 7.85 2,212.80 2,025.27 187.53 26,553 7.85 2,084.41 29,288 7.85 2,299.11 30,428 7.85 2,388.60 

Direct Loan 98,771.65 1.30 1,284.03 97,182.77 3.98 3,867.87 3,771.26 96.61 100,105 3.98 3,984.18 105,039 3.98 4,180.55 110,514 3.98 4,398.46 

Title I (7) 15,715.00 .127 19.95 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 

TOTAL (8) 144,395.93 1.29 1,866.27 125,371.32 4.85 6,080.67 5,796.53 284.14 126,658 4.79 6,068.59 134,327 4.82 6,479.66 140,942 4.82 6,787.06 

(1) The source of FY 2015 outlays for all programs is FSA’s Financial Management System (FMS) as presented in the FY 2015 AFR.

(2) The PY improper payment estimates reported in the table above reflect the improper payment estimates for FY 2015 as reported in the FY 2015 AFR. FSA has published 

recalculated FY 2015 improper payment rates in response to the FY 2015 IPERA Compliance Audit Report published by OIG on May 10, 2016. The updated improper payment rates 

are prepared in accordance with OMB-approved methodologies. The estimated improper payment rate and improper payment total for the Direct Loan program as recalculated are 

2.63% and $2,597.69 million, respectively. The estimated improper payment rate and improper payment total for the Pell Grant program as recalculated are 1.52% and $454.62 

million, respectively. These estimates are reported using the alternative sampling and estimation methodology approved as of October 20, 2015. 

(3) The source of FY 2016 outlays for all program amounts is FMS. 

(4) In FY 2016, the Pell Grant and Direct Loan program improper payment estimates are reported using the updated alternative sampling and estimation methodology approved by 

OMB on October 14, 2016. FY 2016 rates are based on program reviews performed in FYs 2014–16 for award year 2013–14 data. Under the updated methodology, two new 

sources were incorporated into the FY 2016 improper payment estimates, which impacted the estimates for both programs. For the Pell Grant program, incorporating improper 

payment estimates resulting from recipients submitting inaccurate self-reported income on the FAFSA impacted the estimate by approximately 1.34% while incorporating improper 

payment estimates resulting from schools disbursing funds to students enrolled in ineligible programs/locations impacted the estimate by approximately 0.13%. For the Direct Loan 

Program, incorporating improper payment estimates resulting from schools disbursing funds to students enrolled in ineligible programs/locations impacted the Direct Loan estimate 

by approximately 1.15%. 

(5) The source of FYs 2017–19 Pell Grant and Direct Loan outlay amounts is the FY 2017 President’s Budget at the Mid-Session Review. 

(6) The Department uses an OMB-approved alternative estimation methodology to estimate improper payments for the Pell Grant and Direct Loan programs. These estimates lack the 

precision of other estimates developed using random, statistical methodologies. As disclosed above, although the sample size has increased year over year, there continues to be 

both imprecision and variability in the improper payments estimates that limit management’s confidence in using these results to establish out-year reduction targets. Accordingly, 

out-year targets are set to the CY IP% until the methodology is stabilized and the precision and volatility constraints are addressed. In FY 2017, the Department will continue to work 

with relevant stakeholders to consider ways to increase precision and decrease volatility in future year methodologies and estimates. Increases in the improper payment rates over 

the prior year and failure to meet the targets can be attributed to changes to and the imprecision of the alternative methodology, as opposed to a control failure or increase in actual 

improper payments in the underlying programs. 

(7) Title I has historically been included in this table because it is a former Section 57 program and OMB A-11, dated 2002, Section 57, Exhibit 57B required agencies to report on 

programs deemed at risk for erroneous payments. However, in FY 2016, the Department requested relief, with OIG’s concurrence, from reporting Title I estimates on improper 

payments since it demonstrated that the program had more than two consecutive years of improper payments reporting below the IPERA thresholds. OMB approved the Department’s 

request on March 4, 2016, with the caveat that a risk assessment be conducted in FY 2016 and FY 2017 to ensure the enactment of the Every Student Succeeds Act has not caused 

the Title I program to become susceptible to significant improper payments. 

(8) The total of the estimates for the agency does not represent a true statistical estimate for the agency.
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IMPROPER PAYMENTS REPORTING DETAILS

FY 2016 Agency Financial Report—U.S. Department of Education 121 

High-Priority Programs 

In FY 2011, OMB designated the Pell Grant program a high-priority program, because 

estimated FY 2010 Pell Grant improper payments of $1,005 million exceeded the OMB 

FY 2010 high-priority program threshold of $750 million. Since then, the Department has 

worked with OMB to implement all applicable high-priority program requirements. On 

February 4, 2015, OMB also designated the Direct Loan program as a high-priority program 

as estimated improper payments of $1,532 million in FY 2014 exceeded the statutory 

$750 million threshold. 

Under the Executive Order 13520, agencies with high-priority programs shall establish annual 

or semiannual measurements or actions for reducing improper payments. The Department 

submitted supplemental measures for the Pell Grant and Direct Loan programs to OMB to be 

approved for FY 2015 reporting. OMB granted approval on October 3, 2015. 

The supplemental measure for the Pell Grant program is based on the total number of Pell 

Grant-eligible applicants who transferred tax data from the IRS to their FAFSA as a 

percentage of the total number of Pell Grant-eligible applicants who were determined to be 

eligible to use the Internal Revenue Service Data Retrieval Tool (IRS DRT) to transfer tax 

data. 

For the Direct Loan program, a similar supplemental measure is in place based on the total 

number of Direct Loan recipients who transferred tax data from the IRS to the FAFSA as a 

percentage of the total number of Direct Loan recipients who were determined to be eligible 

to use the IRS DRT to transfer tax data. 

The supplemental measures for the Pell Grant and Direct Loan programs focus on the higher 

risk area of misreported income by the student/parent on the FAFSA. Use of the IRS DRT to 

directly transfer tax information from IRS to the online FAFSA verifies applicants’ income, and 

as applicable their parents’ income, to determine how much aid they are eligible to receive. 

Errors in income on an application is one of the root causes of improper payments for both 

the Direct Loan and Pell Grant programs; transferring tax data to the FAFSA with the IRS 

DRT helps ensure that the income is more accurate and therefore reduces the likelihood of 

an improper payment being made. The Department continues to focus on efforts to increase 

the population of applicants eligible to use the IRS DRT as described in the Improper 

Payment Corrective Actions section below. 

The Pell Grant and Direct Loan supplemental measure rates for award year 2015–16 are 

61.99 and 59.26, respectively. The Pell Grant and Direct Loan supplemental measure targets 

for award year 2016–17 are also 61.99 and 59.26, respectively. The supplemental measures, 

current FY supplemental measure rates, and supplemental measure targets are reported 

annually on PaymentAccuracy.gov for both programs. 

On May 10, 2015, the Federal Student Aid PIN was replaced with FSA ID, improving the 

security and customer experience for the Department’s student- and borrower-based 

websites. Students, parents, and borrowers are required to use an FSA ID, made up of a 

username and password, to access certain Department websites and tools, including the IRS 

DRT. As a result of the transition, IRS DRT usage dropped from previous levels. IRS DRT 

usage is expected to remain at award year 2015–16 levels through award year 2016–17. 

FSA continues to work to ensure that the transition to the FSA ID is as seamless as possible 
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122 FY 2016 Agency Financial Report—U.S. Department of Education 

for its customers. The Department also continues to encourage students and parents to use 

the IRS DRT to import data from their tax return and not change it. It is the fastest, easiest, 

and most secure method of meeting income verification requirements. FSA has modified 

FAFSA on the Web to encourage all eligible applicants and parents to use the IRS DRT, 

including displaying new messages to explain the advantages to using the IRS DRT on the 

initial student and parent finances pages, and directing eligible applicants and parents who do 

not opt to link to the IRS from these pages to a new page that recommends IRS DRT use. 

Measures to Ensure Program Access 

FSA is committed to ensuring program access and providing federal student aid to all 

eligible students pursuing postsecondary education. The IRS DRT supports access to aid 

programs by allowing students to transfer tax data directly from the IRS to the online FAFSA 

and lessens the burden of income verification. We continue to offer additional application 

methods to individuals to ensure that applicants can take advantage of an application option 

that best suits their personal needs. Furthermore, improvements in the last few years to the 

FAFSA and IRS DRT have resulted in a decrease in the average time it takes a student to

complete the online FAFSA. 

On February 4, 2013, FSA’s Customer Experience group announced a partnership alliance 

between FSA and the IRS. The partnership focuses on reaching more individuals in low- to 

moderate-income communities with the goal of providing them with information, assistance, 

and access to relevant IRS and FSA services. The partnership is expected to contribute to 

increased awareness of FSA programs and create opportunities for increased access to the 

FAFSA.

Beginning with the 2013 tax year (the 2014–15 FAFSA Processing Year), the IRS has 

added a new, more efficient way that tax filers can request and receive Tax Return 

Transcripts. With the new IRS “Get Transcript Online” tool, the tax filer submits an online 

transcript request to the IRS and, if the request is authenticated, a second window displays 

the transcript in Portable Document Format. This new IRS tool potentially reduces the 

burden on FAFSA applicants who are requested to provide tax transcripts. 

In March 2014, the Department launched the FAFSA Completion Initiative, through which 

the Department is partnering with state student grant agencies to allow these agencies to

provide secondary schools, school districts, and certain designated entities with limited, yet

important, information on student progress in completing the FAFSA form. The initiative will 

enable state student grant agencies and their school and district partners to identify those 

students who have not filed a FAFSA form and better target counseling, filing help, and 

other resources to those students. 

Improper Payment Root Cause Categories 

Our analysis indicated that the underlying root cause of improper payments for the Pell 

Grant and Direct Loan programs in FY 2016 was failure to verify financial data and 

administrative or process errors made by other parties. The root causes were identified 

through improper payment testing and categorized using categories of error as defined in 

the October 2014 update to OMB Circular A-123, Appendix C (OMB Memorandum 

M-15-02). Specific root causes associated with the “Failure to Verify – Financial Data” 

category include, but are not limited to, ineligibility for a Pell Grant or Direct Loan and 
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FY 2016 Agency Financial Report—U.S. Department of Education 123 

incorrect self-reporting of an applicant’s income that leads to incorrect awards based on 

Expected Family Contribution. Specific root causes associated with the “Administrative or 

Process Errors Made by – Other Party” category include, but are not limited to, incorrect 

processing of student data by institutions during normal operations; student account data 

changes not applied or processed correctly; satisfactory academic progress not achieved; 

incorrectly calculated return records by institutions returning Title IV student aid funds; and 

processing errors at the servicer level. Table 2 below, Improper Payment Root Cause 

Category Matrix, summarizes the root cause categories for the Pell Grant and Direct Loan 

programs. 

Table 2. Improper Payment Root Cause Category Matrix 

(Dollars in Millions) 

Reason for Improper Payment

Direct Loan Pell Grant 

Overpayments Underpayments Over-payments Underpayments 

Program Design or Structural Issue 

Inability to Authenticate Eligibility

Failure to Verify: 

Death Data 

Financial Data $92.39 $0 $328.28 $24.41 

Excluded Party 

Data 

Prisoner Data 

Other Eligibility 

Data (explain)

Administrative 

or Process 

Error Made by: 

Federal Agency 

State or Local 

Agency 

Other Party 

(e.g., 

participating 

lender, health 

care provider, or 

any other 

organization 

administering 

federal dollars) 

$3,678.87 $96.61 $1,696.99 $163.12 

Medical Necessity 

Insufficient Documentation to Determine 

Other Reason (a) (explain) 

Other Reason (b) (explain) 

TOTAL $3,771.26 $96.61 $2,025.27 $187.53 

Improper Payment Corrective Actions 

This section presents the corrective actions for the Pell Grant and Direct Loan programs. 

The corrective actions presented below are recommendations to the schools for findings 

that resulted from FSA Program Reviews. The discussion below also includes other longterm corrective actions applicable to these programs, such as the IRS DRT and verification. 
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124 FY 2016 Agency Financial Report—U.S. Department of Education 

Corrective Actions – Root Cause Category: Failure to Verify Data 

Error Cause Corrective Actions Completion Timeline 

Failure to 

Verify 

Financial Data 

Final Program Review Determinations 

indicate the action(s) institutions are required 

to take in order to make the Title IV, HEA 

programs, or the recipients, whole for any 

funds that were improperly managed and to 

prevent the same problems from recurring. 

FSA continues to utilize and promote the IRS 

DRT, which enables Title IV student aid 

applicants and, as needed, parents of 

applicants, to transfer certain tax return 

information from an IRS website directly to

their online FAFSA. 

For the 2017–18 award year, applicants are 

able to complete their FAFSA using “priorprior year” tax data. For the 2017–2018 

FAFSA, students and families provide income 

information from calendar year 2015 and not 

from calendar year 2016. This is in contrast 

with the “prior year” process previously 

employed where many applicants submitted 

their FAFSAs before tax returns were 

completed, resulting in the need to estimate 

income and tax information that subsequently 

needed to be corrected once the tax return 

was filed; or worse, waited to complete their 

FAFSA until after the tax return had been 

filed. 

Additionally, FSA continues to enhance 

verification procedures and require selected 

schools to verify specific information reported 

on the FAFSA by student aid applicants. As 

with prior years’ verification selection, databased statistical analysis will continue to be 

used by the Department to select for 

verification the 2017–2018 FAFSA applicants 

with the highest statistical probability of error 

and the impact of such error on award 

amounts. 

Completion dates for 

findings identified via the 

Program Review process 

vary. Overall, FSA 

requires that all findings

identified during the FSA

Program Reviews are 

tracked through resolution 

via the Postsecondary

Education Participants

System (PEPS). This

corrective action process

is further described in the 

FY 2012 AFR. 

Promotion of the IRS 

DRT will continue in 

FY 2017 and beyond. 

On October 1, 2016, the 

2017–18 FAFSA became 

available, as opposed to 

January 1, 2017, with the 

ability to use “prior-prior 

year” tax data. Both of 

these changes will assist 

in preventing improper 

payments as it provides 

greater access to IRS 

DRT and there is more 

time for effective 

verification procedures. 

Enhancements to 

verification procedures is 

a continuous process that 

is reviewed each award 

year. 
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FY 2016 Agency Financial Report—U.S. Department of Education 125 

Corrective Actions – Root Cause Category: Administrative or Process Errors 

Error Cause Corrective Actions Completion Timeline 

Administrative 

or Process 

Errors by Other 

Party 

Final Program Review Determinations 

indicate the action(s) the institution is 

required to take in order to make the Title IV, 

HEA programs, or the recipients whole for 

any funds that were improperly managed and 

to prevent the same problems from recurring. 

Completion dates for 

findings identified via the 

Program Review process 

vary. Overall, FSA 

requires that all findings

identified during the FSA

Program Reviews are 

tracked through resolution 

via PEPS. This corrective 

action process is further

described in the FY 2012

AFR. 

Administrative 

or Process 

Errors by Other 

Party (Improper 

FFEL to Direct 

Loan 

Consolidations) 

FSA is coordinating with the respective Title 

IV Additional Servicers (TIVAS) and Not-ForProfit (NFP) servicers to develop and 

implement corrective action plans to address 

consolidation errors, such as funds returned 

due to duplicate funding or multiple Loan 

Verification Certificates (LVCs), inclusion of 

student loans that the borrower desired to 

exclude or were determined to be ineligible, 

and payoffs sent to the wrong address. FSA 

will work to reevaluate the current LVC 

processing procedures and will consider 

improvements in system edits to prevent the 

processing of duplicate LVCs and ineligible 

loans. Additionally, management will consider 

additional trainings on processing LVCs to 

ensure the correct account, lender, and loan 

information is processed in an effort to reduce 

the risk of potential improper payments. 

Improper payments

identified through testing 

of Direct Loan 

Consolidations for 

FY 2016 were remediated 

or are in the process of 

being remediated during 

FY 2017. 

Administrative 

or Process 

Errors by Other 

Party (Improper 

Direct Loan 

Refunds) 

FSA is coordinating with the respective 

TIVAS and NFP servicers to develop and 

implement corrective action plans to address 

refund errors, such as refunds made to 

ineligible lenders and borrowers, made for 

ineligible purposes, made in the incorrect 

amount, and/or sent to the incorrect payee. 

FSA will also consider additional trainings on 

refund processing to help ensure refunds are 

made in a manner consistent with FSA 

guidance. 

Improper payments

identified through testing 

of Direct Loan Refunds for 

FY 2016 were remediated 

or are in the process of 

being remediated during 

FY 2017. 

Additional Corrective actions are described in the FY 2012 AFR. These include actions the 

Department continues to take to prevent improper payments, such as activities to improve 
OTHER INFORMATION

IMPROPER PAYMENTS REPORTING DETAILS

126 FY 2016 Agency Financial Report—U.S. Department of Education 

institutional level administration of Title IV Aid through development and dissemination of 

information, resources, and tools to institutions. 

Going forward, FSA will expand the use of data analytics to identify anomalies, trends, and 

patterns in application and disbursement data to help identify potential risk factors that may 

inform risk-based decisions regarding program oversight. FSA will further collaborate with 

OIG to receive and analyze fraud referrals and to identify potential fraud indicators for 

suspicious student activity. FSA has established a fraud group and engaged contract 

support to review and act on OIG fraud referrals. The primary objective of initial activities 

includes the intake, analysis, and disposition of referrals. FSA uses this analysis to inform 

recommendations on data analytics and identify ways to improve controls. 

Internal Control Over Payments 

The Department developed robust internal controls to prevent, detect, and recover improper 

payments. In designing controls, the Department strives to strike the right balance between 

providing timely and accurate payments to grant recipients and students, while at the same 

time ensuring that the controls are not too costly and burdensome to fund recipients. 

Additionally, the Department must rely on controls established by fund recipients who make 

payments on behalf of the Department. These controls are outside of the Department’s 

operational authority and present higher risks, as evidenced by OIG work identifying 

instances of questioned costs and restitution payments along with the fact that the majority 

of the estimated improper payments in FY 2016 are attributed to root causes associated 

with these third parties. 

The Department’s controls over improper payments are an essential part of the 

Department’s internal control framework described in the Analysis of Systems, Controls, 

and Legal Compliance section. As described above, the Department uses an alternative 

methodology to estimate the improper payment rates for the Pell Grant and Direct Loan 

programs. The Department continues to assess and enhance its controls over student aid 

payments. For example, the Department routinely analyzes application and payment data 

and considers other factors, such as program reviews and audit reports, to inform control 

enhancements and to devise ways to further reduce the risk of improper payments. For any 

deficiencies identified, root causes are identified and corrective action plans established 

and tracked to resolution. 

Table 3 below summarizes FSA’s self-assessment on the status of its internal control over 

payments for these programs. 

Table 3. Status of Internal Controls 

Internal Control Standards Pell Grant Direct Loan 

Control Environment 4 4 

Risk Assessment 4 4 

Control Activities 3 3 

Information and Communication 3 3 

Monitoring 3 3 

Legend: 

4 = Sufficient controls are in place to prevent IPs 

3 = Controls are in place to prevent IPs but there is room for improvement 

2 = Minimal controls are in place to prevent IPs 

1 = Controls are not in place to prevent IPs 
OTHER INFORMATION

IMPROPER PAYMENTS REPORTING DETAILS

FY 2016 Agency Financial Report—U.S. Department of Education 127 

FSA leverages its OMB Circular A-123 Appendix A assessment to evaluate the design and 

operating effectiveness of controls intended to prevent and detect improper payments. FSA 

assesses these controls overall and by the internal control components identified below: 

 Control Environment. FSA has a robust entity-level controls framework that provides 

discipline and structure to help FSA achieve its objectives. Part of this framework is a 

governance structure that includes an Improper Payment Working Group, a body of 

accountable stakeholders that informs decisions related to improper payment 

requirements, estimation, and control. 

 Risk Assessment. FSA uses a risk assessment approach to target high-risk areas and 

focus resources. FSA’s Office of Program Compliance, School Eligibility Service Group 

performs annual risk assessments to inform decisions on where and how to target each 

year’s program reviews. As a function of its A-123 program, FSA performs annual risk 

assessment of business processes and systems, including Pell Grant and Direct Loan 

payment processes, to determine where to focus control testing. FSA performs a 

qualitative risk assessment at least once every three years to identify FSA programs 

susceptible to significant improper payments. 

 Control Activities. In FY 2016, FSA identified 328 controls related to improper 

payments prevention or detection through its A-123A assessment. As an example, FSA 

annually conducts approximately 250–300 Program Reviews of the approximately 

6,000 eligible schools to assess institutions’ compliance with Title IV regulations. 

 Information and Communication. FSA’s internal control framework supports quality 

information management and communication. FSA has an incident reporting process to 

collect information, such as high-dollar overpayment on a quarterly basis. FSA reports 

an estimate of the annual amount and rate of improper payments for all programs and 

activities susceptible to significant improper payments. In addition, FSA provides 

guidance to third parties through Federal Register notices, Dear Colleague Letters, and 

the Information for Financial Aid Professionals website, among others. 

 Monitoring. FSA has a set of activities to monitor program performance, identify 

instances of improper payments, and promptly resolve findings of audits and other 

reviews related to improper payments. As an example, upon completion of Program 

Reviews, FSA monitors appropriate corrective action and resolution of improper 

payments. 

As indicated above, the Department is committed to preventing improper payments with 

front-end controls, and detecting and recovering them if they occur. The Department 

continues efforts to: (1) assess the risk of improper payments, (2) estimate improper 

payments, (3) address root causes of improper payments, and (4) recover improper 

payments. 

Accountability 

FSA and other Department offices, managers, and staff are held accountable for meeting 

applicable improper payments reduction targets and for establishing and maintaining 

sufficient internal controls, including a control environment that prevents improper payments 

from being made, and promptly detects and recovers any improper payments that may 

occur. Offices and managers are held accountable through a variety of mechanisms and 

controls, including annual performance measures aligned to the strategic plan, 
OTHER INFORMATION

IMPROPER PAYMENTS REPORTING DETAILS

128 FY 2016 Agency Financial Report—U.S. Department of Education 

organizational performance review criteria, and individual annual performance appraisal 

criteria. 

Schools are responsible and held accountable for recipient verification for need-based aid. 

FSA certifies a school’s eligibility for participation in Title IV programs, conducts periodic 

Program Reviews of schools to verify compliance, and evaluates school financial statement 

and compliance audits to ensure any potential compliance issues or control weaknesses 

are resolved. Department and FSA contractors are held accountable through various 

contract management and oversight activities and functions, control assessments, and 

audits. 

Agency Information Systems and Other Infrastructure 

Audit Follow-up

The Department gathers and manages thousands of audits of grantees. Audit records are 

managed and maintained in an Audit Accountability and Resolution Tracking System for 

non-FSA-managed programs and an EZ Audit system for FSA-managed programs. Audits 

are a key risk management tool, and the Department has demonstrated great success 

working with grant recipients to resolve audit findings in a timely manner. Data from these 

audit systems are analyzed to determine trends in audit findings and resolution, allowing 

the Department to search for and better understand commonalities. This effort is assisting 

the Department in reducing improper payments by strengthening audit resolution and 

grants management. 

Barriers 

For FSA programs, the Department does not see significant barriers in taking corrective 

action in reducing improper payments. A detailed discussion of program-specific barriers 

can be found in the FY 2012 Report on the Department of Education’s Payment Recapture 

Audits. 

Recapture of Improper Payments Reporting 

Agencies are required to conduct recovery audits for contract payments and programs that 

expend $1 million or more annually if conducting such audits would be cost effective. The 

Department performed a cost-benefit analysis and determined that a payment recapture 

audit program would not be cost effective for FSA programs, other grant programs, and 

contracts. OMB was notified on October 30, 2014, that it was not cost effective to conduct a 

payment recapture audit and the programs/activities would be excluded from a payment 

recapture audit program. OMB sent their concurrence to the Department on September 21, 

2015. A comprehensive report on the cost effectiveness of the various recapture audit 

programs can be found in the Department’s FY 2012 Report on the Department of 

Education’s Payment Recapture Audits. 

The Department identifies and recovers improper payments through sources other than 

payment recapture audits. The Department works with grantees and Title IV (FSA) program 

participants to resolve and recover amounts identified in compliance audits, OIG audits, and 

Department-conducted program reviews as potential improper payments. Accounts 

receivable are established for amounts determined to be due to the Department and 
OTHER INFORMATION

IMPROPER PAYMENTS REPORTING DETAILS

FY 2016 Agency Financial Report—U.S. Department of Education 129 

collection actions are pursued. Payments can also be collected through offsets and other 

means. Recipients of Department funds can appeal management’s decisions regarding

funds to be returned to the Department, thereby delaying or decreasing the amounts the 

Department is able to collect. 

In addition, for the Pell Grant program, recoveries also occur when overpayments to

students are assigned to FSA for collection. Pell Grant amounts recovered through student 

debt collection were approximately $9.25 million in FY 2016, and $10.3 million in FY 2015. 

While all programs may have student debts transferred to debt collection, the categorization 

of resulting collections as an improper payment recovery is unique to the Pell Grant

program. Unlike loans, Pell Grant payments transferred to debt collection commonly indicate 

a potential improper payment at time of disbursement. 

The Department has not established formal recovery targets for contract payments given 

the consistently insignificant findings. Since FY 2004, the Department’s audits have found 

no improper payments for recovery, and there are no outstanding overpayments to report. 

Should future contract payments be identified for recovery, the Department will establish 

recovery targets, taking into consideration the nature of the overpayments and any potential 

barriers to recovering funds. 

Table 4, Improper Payment Recaptures without Audit Programs, below provides estimates of 

the amounts identified and recovered through Compliance Audits, OIG Audits, and Program 

Reviews for FY 2016. 

Table 4. Overpayment Recaptures without Recapture Audit Programs(1) 

(Dollars in Millions) 

Overpayments Recaptured outside of Payment Recapture Audits

Program or Activity(2) Amount 

Identified 

Amount 

Recaptured 

All Department programs (including FSA) 118.71 20.35 

TOTAL 118.71 20.35 

(1) The Department’s cost-benefit analysis determined that a payment recapture audit program would not be 

cost-effective for FSA programs, other grant programs, and contracts. As a result, OMB A-136 Guidance 

Table 5, Disposition of Funds Recaptured Through Payment Recapture Audits, and Table 6, Aging of 

Outstanding Overpayments Identified in the Payment Recapture Audits, have been omitted. 

(2) The Department is unable to show the breakdown of amount identified and recaptured by program due to 

system restraints. A system change was put in place during 2016 that will allow the Department to capture 

the data by program for FY 2017. 

Additional Comments 

Continuous Monitoring and Data Analytics 

The Department has a Continuous Controls Monitoring System to help detect improper 

payments. This system applies a series of integrity checks to the Department’s grant (nonFSA) payments and flags anomalous transactions for follow-up analysis. Examples of 

issues that can be detected include duplicate or incorrect drawdowns and unusual refunds 

and adjustments by grantees. The Department continues upgrading this system to expand 

the transactions being evaluated, improve the relevance of the checks with improved 
OTHER INFORMATION

IMPROPER PAYMENTS REPORTING DETAILS

130 FY 2016 Agency Financial Report—U.S. Department of Education 

algorithms, and integrate new sources of comparative data. A key objective of this initiative 

is development of predictive modeling to prevent improper payments to the maximum 

degree possible. 

Risk Management 

The Department took measures to prevent improper payments through the use of the 

Decision Support System to run Entity Risk Review reports for non-FSA grant awards. 

Using data drawn from the Department’s grants business system, the Federal Audit 

Clearinghouse, the Institutes of Higher Education accreditation reporting, and Dun & 

Bradstreet, this report identifies financial, programmatic, and controls risks posed by award 

to the prospective grantee. Grant officers and awarding officials use the Entity Risk Review 

reports in the preaward stage of the grant process to assess grantees’ risk and assist in the 

determination of special conditions for grant awards. They also apply these reports in 

devising monitoring plans for the life of the grant, strengthening them as the Department’s 

first line of defense against improper payments by grantees. 

In FY 2016, 100 percent of Department’s discretionary grants awards were assessed for 

risk prior to award in the areas of: financial stability; adequacy of management systems to 

meet applicable standards; performance history; and compliance with applicable laws and 

regulations, including those related to Suspension and Debarment. This work successfully 

demonstrated the Department’s early compliance with 2 C.F.R. Section 205, Federal 

Awarding Agency Review of Risk Posed by Applicants.

Payment Integrity Workgroup 

The Department has an internal workgroup intended to demonstrate payment integrity as 

opposed to being focused solely on improper payments. The workgroup includes 

representatives from different offices that are working collaboratively to evaluate the 

Department’s framework for assessing the risk of improper payments and for strengthening 

the controls on estimating, preventing, detecting, and recovering improper payments. The 

workgroup is intended to identify, categorize, assess, and improve controls, as well as to 

train staff on their responsibilities with respect to ensuring the integrity of Department 

payments. 

The Department also participates in the Improper Payments Federal Community of Practice 

group organized by the Social Security Administration. The workgroup is focused on the 

prevention of improper payments and sharing best practices between federal agencies. The 

group’s vision is to increase interagency relationships, collaboration, and cooperation; 

share ideas and best practices to map knowledge and find solutions; and use the combined 

leadership to foster innovation. 
OTHER INFORMATION

IMPROPER PAYMENTS REPORTING DETAILS

FY 2016 Agency Financial Report—U.S. Department of Education 131 

Agency Reduction of Improper Payments with the Do Not Pay 

Initiative 

Table 7. Results of the Do Not Pay Initiative in Preventing Improper Payments 

(Dollars in Millions) 

Number (#) 

of 

payments 

reviewed 

for possible 

improper 

payments 

Dollars ($) of 

payments 

reviewed for 

possible 

improper 

payments 

Number (#) 

of 

payments 

stopped 

Dollars ($) 

of 

payments 

stopped 

Number (#) of 

potential 

improper 

payments 

reviewed and 

determined 

accurate(3)

Dollars ($) of 

potential 

improper 

payments 

reviewed and 

determined 

accurate 

Reviews with 

the IPERIA 

specified 

databases(1)

1,357,920 187,815.45 0 0 851 .247781 

Reviews with 

databases 

not listed in 

IPERIA(2)

168,787 1,564.60 0 0 171 .505709 

(1) IPERIA databases used for payment screening include the Death Master File and the System for Award 

Management. Data for the period October 1, 2015, to September 30, 2016. 

(2) Reviews with databases not listed in IPERIA include payments reviewed through the Department’s 

Continuous Controls Monitoring System (CCMS). This system applies a series of integrity checks to the 

Department’s grant (non-FSA) payments and flags anomalous transactions for follow-up analysis. Examples of 

issues that can be detected include duplicate or incorrect drawdowns and unusual refunds and adjustments by 

grantees. The Department continues upgrading this system to expand the transactions being evaluated, 

improve the relevance of the checks with improved algorithms, and integrate new sources of comparative data. 

A key objective of this initiative is development of predictive modeling to prevent improper payments to the 

maximum degree possible. Data for the period October 1, 2015, to September 30, 2016. 

(3) Payments requiring further review and identified as proper. 

The Department continues its efforts to prevent and detect improper payments via the DNP 

Business Center portal as required by IPERIA. During FY 2016, 1,357,920 payments, 

totaling $187.8 billion, were reviewed for possible improper payments through the DNP 

portal. A total of 851 payments, totaling $247,781, were further reviewed and determined to 

be accurate. The Department validated that potential improper payments identified were 

adjudicated and reported to Treasury in a timely manner. The Department also reviewed 

168,787 payment refunds, totaling $1.6 billion, for potential improper payments through the 

Continuous Controls Monitoring System. A total of 212 transactions were further reviewed 

for potential improper payments and 171 transactions, totaling $505,709, were determined 

to be accurate. 

The Department is also looking at ways to partner with the Treasury Department’s DNP

Business Center to enhance data analytics capabilities, reduce gaps, and improve 

processes to ensure payments are proper.
OTHER INFORMATION

132 FY 2016 Agency Financial Report—U.S. Department of Education 

Combined Schedule of Spending 

The Schedule of Spending (SOS) presents: (a) what money was available to the 

Department to spend, (b) how the money was spent, and (c) who the money went to. For 

information on spending, USAspending.gov is a searchable website that provides 

information on federal awards and is accessible to the public at no cost. 
OTHER INFORMATION

COMBINED SCHEDULE OF SPENDING

FY 2016 Agency Financial Report—U.S. Department of Education 133 

United States Department of Education 

Combined Schedule of Spending 

For the Years Ended September 30, 2016 and 2015 

(Dollars in Millions) 

FY 2016 FY 2015 

Budgetary 

Non-Budgetary 

Credit Reform 

Financing 

Accounts Budgetary 

Non-Budgetary 

Credit Reform 

Financing 

Accounts 

Section I: What Money Is Available to Spend? 

This section presents resources that were available to spend by the Department.

 Total Resources $ 103,245 $ 231,821 $ 117,218 $ 232,460 

 Amount Available but Not Agreed to be Spent (10,280) - (11,806) (550)

 Amount Not Available to be Spent (2,163) (15,479) (2,968) (13,887) 

Total Amounts Agreed to be Spent $ 90,802 $ 216,342 $ 102,444 $ 218,023 

Section II: How Was the Money Spent?

This section presents services and items purchased, is grouped by major program, and is based on outlays.

Increase College Access, Quality, and Completion

 Credit Program Loan Disbursements and Claim Payments $ 12,608 $ 196,012 $ 25,249 $ 198,431 

 Grants 33,880 - 35,569 - 

 Personnel Compensation and Benefits 291 - 273 - 

 Contractual Services 1,351 775 1,248 1,065 

 Other 1/ 36 - 37 - 

 Total Program Spending 47,626 196,787 62,376 199,496 

Improve Preparation for College and Career from Birth 

Through 12th Grade, Especially for Children with High Needs

 Grants 21,523 - 22,322 - 

 Personnel Compensation and Benefits 74 - 73 - 

 Contractual Services 87 - 106 - 

 Other 1/ 13 - 15 - 

 Total Program Spending 21,697 - 22,516 - 

Ensure Effective Educational Opportunities for All Students

 Grants 16,691 - 16,474 - 

 Personnel Compensation and Benefits 151 - 148 - 

 Contractual Services 43 - 49 - 

 Other 1/ 23 - 23 - 

 Total Program Spending 16,908 - 16,694 - 

Enhance the Education System’s Ability to Continuously Improve

 Grants 1,659 - 1,661 - 

 Personnel Compensation and Benefits 94 - 94 - 

 Contractual Services 451 - 491 - 

 Other 1/ 17 - 15 - 

 Total Program Spending 2,221 - 2,261 - 

Total Spending $ 88,452 $ 196,787 $ 103,847 $ 199,496 

 Amounts Remaining to be Spent2/ 2,350 19,555 (1,403) 18,527 

Total Amounts Agreed to be Spent $ 90,802 $ 216,342 $ 102,444 $ 218,023 

Section III: Who Did the Money Go To?

This section identifies with whom the Department is spending money based on obligations incurred.

 Nonfederal Obligations $ 90,323 $ 216,341 $ 101,977 $ 218,023 

 Federal Obligations 479 1 467 - 

Total Amounts Agreed to be Spent $ 90,802 $ 216,342 $ 102,444 $ 218,023 

1/ Other primarily consists of payments for rent, utilities, communication, travel, and transportation. 

2/ The “Amounts Remaining to be Spent” line is the difference between “Total Spending” and “Total Amounts Agreed to be Spent.” Actual spending in the current FY may include spending 

associated with amounts that are agreed to be spent during previous FYs, which may result in negative amounts shown for the “Amounts Remaining to be Spent” line.
OTHER INFORMATION

COMBINED SCHEDULE OF SPENDING

134 FY 2016 Agency Financial Report—U.S. Department of Education 

The combined SOS presents an overview of how and where the Department spent its 

funding. The budgetary information in this schedule is presented on a combined basis and 

not a consolidated basis. 

 The “what money is available to spend” section summarizes the resources that were 

available to spend during the fiscal year. 

 The “how was the money spent” section summarizes the Department’s outlays for the 

fiscal year, categorized by the OMB budget object class definitions found in Circular 

A-11, “Preparation, Submission and Execution of the Budget,” and by payment types.

 The “who did the money go to” section summarizes the Department’s obligations by 

federal and nonfederal components.

 The “total amount agreed to be spent” in each section is equal to the new obligations 

and upward adjustments shown on the combined statement of budgetary resources. 

Similar data are also submitted to USAspending.gov; however, the amounts will not 

reconcile primarily because reporting requirements differ, particularly for loan programs 

and for payroll and employee benefits. 
OTHER INFORMATION

FY 2016 Agency Financial Report—U.S. Department of Education 135 

Summary of Financial Statement Audit and Management 

Assurances 

The following tables provide a summarized report on the Department’s financial statement 

audit and its management assurances. For more details, the auditor’s report can be found 

beginning on page 92 and the Department’s management assurances on pages 30–40. 

Summary of Financial Statement Audit 

Audit Opinion: Unmodified 

Restatement: No 

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 0 0 0 0 0

Summary of Management Assurances 

Effectiveness of Internal Control over Financial Reporting—Federal Managers’ Financial Integrity Act 

(FMFIA) 2 

Statement of Assurance: Unmodified 

Material Weaknesses Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Material Weaknesses 0 0 0 0 0 0

The Department had no material weaknesses in the design or operation of the internal control over financial 

reporting. 

Effectiveness of Internal Control over Operations—FMFIA 2 

Statement of Assurance: Unmodified 

Material Weaknesses Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Material Weaknesses 0 0 0 0 0 0

Conformance with Financial Management System Requirements—FMFIA 4 

Statement of Assurance: The Department systems conform to financial management system requirements. 

Nonconformances Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Nonconformances 0 0 0 0 0 0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

1. System Requirements No lack of compliance 

noted

No lack of compliance 

noted

2. Federal Accounting Standards No lack of compliance 

noted

No lack of compliance 

noted

3. United States Standard General 

Ledger at Transaction Level

No lack of compliance 

noted

No lack of compliance 

noted
OTHER INFORMATION

MEMORANDUM FROM THE OFFICE OF INSPECTOR GENERAL

136 FY 2016 Agency Financial Report—U.S. Department of Education 
OTHER INFORMATION

FY 2016 Agency Financial Report—U.S. Department of Education 137 

Office of Inspector General’s (OIG) Management and 

Performance Challenges for Fiscal Year 2017 

Executive Summary 

The Office of Inspector General (OIG) works to promote efficiency, effectiveness, and 

integrity in the programs and operations of the U.S. Department of Education (Department). 

Through our audits, inspections, investigations, and other reviews, we continue to identify 

areas of concern within the Department’s programs and operations and recommend actions 

the Department should take to address these weaknesses. The Reports Consolidation Act 

of 2000 requires the OIG to identify and report annually on the most serious management 

challenges the Department faces. The Government Performance and Results 

Modernization Act of 2010 requires the Department to include in its agency performance 

plan information on its planned actions, including performance goals, indicators, and 

milestones, to address these challenges. 

Last year, we presented five management challenges: improper payments, information 

technology security, oversight and monitoring, data quality and reporting, and information 

technology system development and implementation. On September 22, 2016, the Office of 

the Deputy Secretary announced an initiative to review the identified management 

challenges, assigned senior managers to be accountable for each, and assembled a 

workgroup of other senior managers throughout the Department to address the noted 

challenges. The Department further noted that this effort is intended to help identifying 

systemic root causes and ensure that Department’s actions are impactful and produce 

results. We consider this initiative to be a positive step towards addressing long-standing 

management challenges and encourage the Department to continue to explore approaches 

that result in targeted focus within each of these areas. Although the Department made 

some progress in addressing these areas, each remains as a management challenge for 

fiscal year (FY) 2017. 

The FY 2017 management challenges are: 

(1) Improper Payments, 

(2) Information Technology Security, 

(3) Oversight and Monitoring, 

(4) Data Quality and Reporting, and 

(5) Information Technology System Development and Implementation. 

These challenges reflect continuing vulnerabilities and emerging issues faced by the 

Department as identified through recent OIG audit, inspection, and investigative work. A 

summary of each management challenge area follows. This FY 2017 Management 

Challenges Report is available at http://www2.ed.gov/about/offices/list/oig/ 

managementchallenges.html. 
OTHER INFORMATION

OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2017

138 FY 2016 Agency Financial Report—U.S. Department of Education 

Management Challenge 1—Improper Payments 

Why This Is a Challenge 

The Department must be able to ensure that the billions of dollars entrusted to it are 

reaching the intended recipients. The Department identified the Federal Pell Grant and the 

William D. Ford Federal Direct Loan (Direct Loan) programs as susceptible to significant 

improper payments. In addition, the Office of Management and Budget (OMB) has 

designated these programs as high-priority programs, which are subject to greater levels of 

oversight. 

Our recent work has demonstrated that the Department remains challenged to meet 

required improper payment reduction targets and to intensify its efforts to successfully 

prevent and identify improper payments. We have identified concerns in numerous areas 

relating to improper payments, including the completeness, accuracy, and reliability of 

improper payment estimates and methodologies. 

In May 2016, we reported that the Department’s published improper payment estimates for 

both the Pell Grant and Direct Loan programs were inaccurate and unreliable because they 

used incorrect formulas in performing calculations and deviated from OMB-approved 

methodologies. We concluded that the Department did not comply with IPERA because it 

did not meet the annual reduction target for the Direct Loan program. The Department’s 

recalculated FY 2015 improper payment rate (2.63 percent) for the Direct Loan program to 

correct for formula execution errors we identified did not meet its reduction target 

(1.49 percent). 

Our semiannual reports to Congress from April 1, 2013, through March 31, 2016, included 

more than $2.3 million in questioned or unsupported costs from audit reports and more than 

$59 million in restitution payments from our investigative activity. 

Progress in Meeting the Challenge 

The Department stated that it had developed internal controls that are intended to prevent, 

detect, and recover improper payments. The Department stated that it strives to provide 

timely and accurate payments to grant recipients and students while ensuring that the 

related controls are not too costly or burdensome to fund recipients. The Department further 

noted that it also relies on controls established by fund recipients who make payments on 

behalf of the Department. 

In response to OIG recommendations, the Department stated that it developed and 

implemented corrective actions to improve the accuracy and completeness of its 2016 

improper payment estimates. This included the establishment of a working group with OIG 

and OMB participation to review changes to the Department’s alternative improper payment 

estimation methodology to resolve identified risks. The Department also convened a senior 

level working group to identify and evaluate estimation methodology options for 2017 that 

would ensure IPERA compliance going forward. The Department added that it had revised 

its 2016 estimation methodology to decrease the volatility of the estimate and to address 

the other issues noted by the OIG. 
OTHER INFORMATION

OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2017

FY 2016 Agency Financial Report—U.S. Department of Education 139 

The Department reported that it continues to assess and enhance its controls over student 

aid payments. The Department stated that it routinely analyzes application and payment 

data and considers other factors, such as program reviews and audit reports, to inform 

control enhancements and to devise ways to further reduce the risk of improper payments. 

The Department added that it has implemented an internal control framework intended to 

prevent or detect improper payments and has established processes to annually assess the 

design and operating effectiveness of these controls. The Department also stated that when 

weaknesses are identified, it identifies root causes and establishes corrective action plans. 

What Needs to Be Done 

The Department’s efforts to revise its estimation methodology are a good step forward to 

better identifying improper payments, so that corrective actions can be developed and 

tracked. The OIG will continue to review the Department’s efforts, with a focus on assessing 

how the new methodology is functioning to identify potential sources of improper payments. 

Ultimately, the ability of the Department to address this management challenge hinges on 

its ability to identify root causes, develop corrective actions, and demonstrate that its efforts 

have resulted in reductions in improper payments. While the Department correctly 

acknowledges that it relies on the internal controls of fund recipients who make payments 

on behalf of the Department, it is important that the Department’s efforts to reduce improper 

payments includes processes to identify high-risk recipients and ensure that those 

recipients have effective systems of internal control. 

Management Challenge 2—Information Technology Security 

Why This Is a Challenge 

The OIG has identified repeated problems in information technology (IT) security and noted 

increasing threats and vulnerabilities to Department systems and data. Department 

systems contain or protect an enormous amount of sensitive information, such as personal 

records, financial information, and other personally identifiable information. Without 

adequate management, operational, and technical security controls in place, the 

Department’s systems and information are vulnerable to attacks. Unauthorized access 

could result in losing data confidentiality and integrity, limiting system availability, and 

reducing system reliability. 

Over the last several years, IT security audits have identified controls that need 

improvement to adequately protect the Department’s systems and data. This included 

weaknesses in configuration management, identity and access management, incident 

response and reporting, risk management, remote access management, and contingency 

planning. 

Progress in Meeting the Challenge 

The Department stated that it has taken a number of steps to strengthen the cybersecurity 

posture of the Department’s networks and systems over the past fiscal year, including:

 Working to identify and protect high value information and assets that resulted in a 

better understanding of the potential impact from a cyber incident and helped to ensure 
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that physical and cybersecurity protections were in place for the Department’s high 

value assets. 

 Strengthening its capability to respond to cybersecurity incidents and identifying a plan 

for future action to establish a mature incident response capability. 

 Establishing daily integrated Security Operations Center calls to communicate events or 

requirements with all necessary stakeholders. 

 Deploying enhanced capabilities for the detection of cyber vulnerabilities and protection 

from cyber threats. 

 Strengthening its partnership with the Department of Homeland Security to accelerate 

the deployment of continuous diagnostics and mitigation capabilities. 

The Department expected that recent actions would sustain and improve the advances 

seen over the past fiscal year. The Department stated that it had completed a significant 

step toward improving overall cybersecurity by requiring all privileged users use hardwarebased Personal Identity Verification cards or alternative forms of strong authentication. The 

Department added that other significant activities included leveraging existing capabilities to 

perform independent verification and validation of contractor submitted data, reviewing 

contractual requirements and assessments for contractor abilities to provide infrastructure 

services and malware detection, continuing employee awareness training, and developing 

IT security staff skills and competencies. 

What Needs to Be Done 

The Department reported significant progress towards addressing long-standing IT security 

weaknesses in the past fiscal year. However, we continue to identify significant 

weaknesses in our annual FISMA audits despite the Department’s reported corrective 

actions to address our prior recommendations. While we commend the Department for 

placing a priority on addressing these weaknesses, it needs to continue its efforts to 

develop and implement an effective system of IT security controls. Our FISMA audits will 

continue to assess the Department’s efforts and this will remain a management challenge 

until our work corroborates that the Department’s system of controls achieves expected 

outcomes. 

Management Challenge 3—Oversight and Monitoring 

Effective oversight and monitoring of the Department’s programs and operations are critical 

to ensure that funds are used for the purposes intended and programs are achieving goals 

and objectives. This is a significant responsibility for the Department given the numbers of 

different entities and programs requiring monitoring and oversight, the amount of funding 

that flows through the Department, and the impact that ineffective monitoring could have on 
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FY 2016 Agency Financial Report—U.S. Department of Education 141 

stakeholders. Two subareas are included in this management challenge—Student Financial 

Assistance (SFA) program participants and grantees.1

Oversight and Monitoring—SFA Program Participants 

Why This Is a Challenge 

The Department must provide effective oversight and monitoring of participants in the SFA 

programs under Title IV of the Higher Education Act of 1965, as amended, to ensure that 

the programs are not subject to fraud, waste, and abuse. The Department’s FY 2017 

budget request includes 139.7 billion in new grants, loans, and work study assistance to 

help an estimated 12.1 million students and their families pay for college. 

The growth of distance education has added to the complexity of the Department’s 

oversight of SFA program participants. The management of distance education programs 

presents challenges to the Department and school officials because little or no in-person 

interaction between the school officials and the student presents difficulties in verifying the 

student’s identity and academic attendance. The overall growth and oversight challenges 

associated with distance learning increases the risk of school noncompliance with the 

federal student aid laws and regulations and creates new opportunities for fraud, abuse, 

and waste in the SFA programs. Our investigative work has identified numerous instances 

of fraud involving the exploitation of vulnerabilities in distance education programs to obtain 

federal student aid. 

Our audits and inspections, along with work conducted by the Government Accountability 

Office continue to identify weaknesses in FSA’s oversight and monitoring of SFA program 

participants. Our audits of individual SFA program participants frequently identified 

noncompliance and waste and abuse of SFA program funds. 

Progress in Meeting the Challenge 

Overall, the Department reported that FSA remains committed to use more innovative and 

efficient methods to bolster its oversight and compliance efforts. This included efforts 

intended to expand the Department’s ability to perform these activities in a more proactive 

and preemptive fashion. The Department reported that it focused on three priority areas in 

its efforts to improve the oversight and monitoring of SFA program participants during 

FY 2016; (1) bolstering capacity to provide adequate Title IV enforcement; (2) enhancing 

oversight of contracts, loan servicing activities, and schools; and (3) expanding Clery Act

and borrower defense work. 

As part of this effort, the Department created the Enforcement Office within FSA to respond 

more quickly and efficiently to allegations of illegal actions by higher education institutions. 

 

1

 This area includes two changes from our previous Management Challenges report. In FY 2016 we 

included Distance Education as a distinct management challenge; however it is included as an 

element of Oversight and Monitoring – SFA Program Participants in this report. The change was 

made after consideration of the Department’s feedback to our prior report. Our FY 2016 report also 

included Oversight and Monitoring – Contractors as a subpart to this section. That element was 

removed because our current body work does not support its continued reporting as a challenge to 

the Department. 
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FSA also noted accomplishments in enhancing its oversight activities made by its 

multiregional review team, Program Compliance unit, and Clery team. 

With respect to the challenges presented by distance education, the Department stated that 

FSA’s Program Compliance unit enhanced the Recipient Data Sheet that is used to 

determine which students are receiving a portion or all of their education via distance 

education. The Department added that in FY 2016, Program Compliance developed and 

delivered a training program for program reviewers on the process to evaluate distance 

education. The training program included three components: a lecture on distance 

education requirements, case studies, and a question-answer session. In addition, a 

recommended work tool was created to assist reviewers in evaluating distance education 

courses. The Department believed that enhanced outcomes were evidenced in subsequent 

reviews of distance education programs. FSA plans to conduct continuous training to 

current and new reviewers to reinforce distance education review requirements and plans 

to monitor program reviews for distance education outcomes. The Program Compliance 

team also plans to work with other parts of FSA to offer training to institutions on distance 

education requirements through conference sessions, webinars, and other trainings. 

What Needs to Be Done 

The Department identified several important accomplishments that are intended to 

collectively improve its ability to provide effective oversight. We recognize the progress 

being made and the need to balance controls with both cost and the ability to provide 

necessary services effectively. However, our audits and investigations involving FSA 

programs continue to identify numerous instances of noncompliance and fraud. 

Overall, the Department needs to ensure that the activities of its Program Compliance office 

result in effective processes to monitor FSA program participants and reduce risk. It also 

should work to ensure that its program review processes are designed and implemented to 

effectively verify that high-risk schools meet requirements for institutional eligibility, financial 

responsibility, and administrative capability. The Department further needs to ensure that 

development and implementation of its Enforcement Office effectively provides the intended 

additional protections to students and taxpayers. Finally, the Department could enhance its 

oversight of FSA programs by developing and implementing improved methods to prevent 

and detect fraud. This includes methods to limit the effectiveness of organized activities 

involving distance fraud rings. 

Oversight and Monitoring—Grantees 

Why This Is a Challenge 

Effective monitoring and oversight are essential for ensuring that grantees meet grant 

requirements and achieve program goals and objectives. The Department’s early learning, 

elementary, and secondary education programs annually serve nearly 18,200 public school 

districts and 50 million students attending more than 98,000 public schools and 

32,000 private schools. Key programs administered by the Department include Title I of the 

Elementary and Secondary Education Act, which under the President’s 2017 request would 

deliver $15.4 billion to help more than 24 million students in high-poverty schools make 

progress toward State academic standards. Another key program is the Individuals with

Disabilities Education Act, Part B Grants to States, which would provide about $11.9 billion 
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to help States and school districts meet the special educational needs of 6.7 million 

students with disabilities. 

OIG work has identified a number of weaknesses in grantee oversight and monitoring. 

These involve local educational agency (LEA) fiscal control issues, State educational 

agency (SEA) control issues, fraud perpetrated by LEA and charter school officials, and 

internal control weaknesses in the Department’s oversight processes. 

Progress in Meeting the Challenge 

To further improve monitoring and promote effective grant oversight, the Department has 

issued guidance to offices that manage formula and discretionary grant programs, provided 

training for staff, and engaged in technical assistance to both staff and external 

stakeholders to enhance business operations in the area of grant award monitoring and 

oversight. In addition, some program offices have piloted new processes to improve 

coverage, efficiency, and consistency in fiscal monitoring across programs. 

What Needs to Be Done 

The Department’s issuance of new grant management guidance to its program offices 

should provide an improved basis for their monitoring activities. However, the Department 

still needs to ensure that its program offices are consistently providing effective risk-based 

oversight of grant recipients across applicable federal education programs. We 

acknowledge that the Department has worked to enhance the knowledge and capabilities 

of its existing employees. However, given the Department’s generally limited staffing in 

relation to the amount of federal funding it oversees, it is important for the Department to 

explore ways to more effectively leverage the resources of other entities that have roles in 

grantee oversight. This could include methods to use the single audit process and updates 

to the OMB 2 CFR 200, Subpart F—Compliance Supplement as ways to improve its 

monitoring efforts and help mitigate fraud and abuse in its programs. 

Management Challenge 4—Data Quality and Reporting 

Why This Is a Challenge 

The Department, its grantees, and its subrecipients must have effective controls to ensure 

that reported data are accurate and reliable. The Department uses data to make certain 

funding decisions, evaluate program performance, and support a number of management 

decisions. Our work has identified a variety of weaknesses in the quality of reported data 

and recommended improvements at the Department, SEA, and LEA level. This included 

weaknesses in controls over the accuracy and reliability of program performance and 

academic assessment data. 

Progress in Meeting the Challenge 

The Department stated that it continues to work to promote SEA controls over data, 

improve its own controls over data submitted by grantees, and ensure the transparency of 

data quality. The Department’s efforts to improve the data that it collects, publishes, and 

uses to inform grant management are coordinated by senior officials who are members of 

the Department’s Data Strategy Team and the EDFacts Governing Board. The Department 
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144 FY 2016 Agency Financial Report—U.S. Department of Education 

also reported that in the past year it had taken steps to promote grantee awareness of data 

quality issues and strengthen its review of grantee data. 

The Department further stated that it has multiple initiatives underway to improve data 

quality and help strengthen the accuracy and reliability of data reported by the Department. 

These included (1) strengthening the procedures for tracking issues with grantee data, 

(2) communicating the importance of grantee internal controls over data quality in 

monitoring, (3) strengthening the language in the certifications that grantees sign when 

submitting data to the Department, (4) improving the process for following up and resolving 

questions about grantee data submitted to EDFacts, and (5) supporting State agencies in 

improving their own data quality procedures. 

The Department added that it continues to include information about data limitations when 

reporting data in the Annual Performance Report and other publications and was 

implementing a corrective action plan in response to the OIG’s recommendation that the 

Department improve its data quality through monitoring efforts. 

What Needs to Be Done 

The Department continues to complete significant work that is intended to improve the 

overall quality of data that it collects and reports. This work should remain a priority, as data 

quality contributes to effective program management and helps ensure the credibility of 

information published by the Department. While the Department has made progress in 

strengthening both grantees’ data quality processes and its own internal reviews of grantee 

data, this area is an ongoing challenge. 

Our recent audits have found weaknesses in grantees’ internal controls over the accuracy 

and reliability of program performance data and student testing data. Overall, the 

Department needs to ensure that it is providing effective oversight and monitoring to 

grantees regarding their controls over data quality. Of note, the Department’s efforts to 

strengthen its procedures for tracking issues with grantee data could serve as a basis for 

sharing information across its program offices and identify entities for enhanced monitoring 

and support. The Department should also continue its efforts to provide appropriate 

technical assistance to grantees as necessary. Overall, the Department must continue to 

work to implement effective controls at all applicable levels to of the data collection and 

review processes to ensure that accurate and reliable data are reported. 

Management Challenge 5—Information Technology System 

Development and Implementation 

Why This Is a Challenge 

The President’s budget for FY 2017 stated that ensuring the efficiency, effectiveness, and 

security of federal IT has never been more central to how Americans are served by their 

government. It further notes that the current administration has focused on driving 

efficiencies in the way the government buys, builds, and delivers IT solutions to provide 

improved services to citizens. It adds that with the ongoing evolution of technology, the 

federal government has an unprecedented opportunity to accelerate the quality and 

timeliness of services delivered to the American people. 
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The Department faces an ongoing challenge of efficiently providing services to growing 

numbers of program participants and managing additional administrative requirements with 

declining staffing levels. The Department reported that it has the smallest staff but the thirdlargest discretionary budget among the 15 Cabinet agencies. The Department further 

reported that between 2005 and 2015 it experienced a 6 percent decrease in full-time 

equivalent usage. This makes effective information systems development and 

implementation and the greater efficiencies such investments can provide critical to the 

success of the Department’s activities and the achievement of its mission.

The Department’s current IT investments include systems that support business processes

such as student application processing and eligibility determination for federal student 

financial assistance; grant and loan award processing; procurement and acquisition; and 

the collection, storage, and reporting on Title IV aid disbursements and aid recipients. 

According to data from the Federal IT Dashboard, the Department’s total IT spending for 

FY 2015 was $689 million, with FSA’s IT spending accounting for more than $458 million of 

the total. 

Our recent work has identified weaknesses in the Department’s processes to oversee and 

monitor systems development that have negatively impacted operations and may have 

resulted in improper payments. 

Progress in Meeting the Challenge 

The Department reported that it had made progress in the overall program management 

and oversight of IT systems. This included developing a Lifecycle Management 

Methodology at FSA, conducting Independent Validation and Verification of a high risk 

system, and establishing a formal contract monitoring plan. The Department stated that it 

planned to continue its progress within this area by further educating project owners of 

lifecycle processes, enhancing program management oversight capabilities, and providing 

additional guidance to new IT system contracts. 

In addition, the Department stated that it continues to execute its Federal Information 

Technology Acquisition Reform Act (FITARA) implementation plan and at the time of this 

report was on track to meet internal CIO and external OMB commitments in the FITARA 

areas of budget formulation and planning, acquisition planning, acquisition execution, and 

organization and workforce. The Department reported that of the 44 baseline tasks, 

33 have been completed and 11 are in progress and scheduled for completion by 

December 31, 2016. Finally the Department stated that its FITARA working group continues 

to meet and address challenges that include improving planning and execution processes. 

What Needs to Be Done 

The Department needs to continue to monitor contractor performance to ensure that system 

deficiencies are corrected and that system performance fully supports the Department’s 

financial reporting and operations. The Department further needs to enhance its 

management and oversight of system modifications and enhancements and ensure that 

appropriate expertise to manage system contracts is in place. While Lifecycle Management 

Methodology was established in FSA, management needs to ensure it is implemented and 

followed. 
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146 FY 2016 Agency Financial Report—U.S. Department of Education 

Looking forward, the Department also needs to continue implementing the requirements of 

the Federal Information Technology Acquisition Reform Act and the revised OMB Circular 

A-130, “Managing Information as a Strategic Resource.” 
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Freeze the Footprint 

This effort strives to bring a new approach to the workplace at the Department, by building 

greater employee performance and productivity through innovative space designs and 

technology enhancements, while reducing the agency’s space footprint and associated outyear costs. The project will also allow the agency to meet the new federal space guidelines 

(150–180 usable square footage/person vs. the current usable square footage of 338). 

The Department Challenges are: 

 Limited IT tools to support new mobile workforce 

 IT infrastructure is outdated

 In some cases, telework expansion has outpaced space designs 

 Agency employee recruitment efforts restricted to a limited number of states, limiting the 

size of the mobile workforce 

The Department Strategy is to: 

 Upgrade the IT infrastructure 

 Provide mobile workers with 21st century tools 

 Strengthen the Performance Management Program 

 Promote cultural acceptance of a mobile workforce 

 Design innovative work spaces 

 Implement an Electronic Records Management System 

 Reduce the space footprint 

Freeze the Footprint Baseline Comparison 

FY 2012 

Baseline 2015 Change (FY 2012 Baseline–2015) 

Square 

Footage 1,563,641 1,548,425 

 

15,216 

 

The square footage totals are for the office and warehouse domestic assets, which are 

assets located in the 50 states, Washington, DC, and United States territories. The square 

footage total includes owned and leased assets. Updated square footage information is 

posted on the performance.gov website. 
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Civil Monetary Penalty Adjustment for Inflation 

The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended, requires 

agencies to make regular and consistent inflationary adjustments of civil monetary penalties 

to maintain their deterrent effect. To improve compliance with the act, and in response to 

multiple audits and recommendations, agencies should report annually in the Other 

Information section the most recent inflationary adjustments to civil monetary penalties to 

ensure penalty adjustments are both timely and accurate. 

Penalty Authority Date of Previous 

Adjustment 

Date of Current 

Adjustment

Current Penalty 

Level

Failure to 

provide 

information for 

cost of higher 

education 

20 USC 

1015(c)(5) 

October 2, 2012 August 1, 2016 $36,256 

Failure to 

provide 

information 

regarding 

teacherpreparation 

programs 

20 USC 

1022d(a)(3) 

October 2, 2012 August 1, 2016 $30,200 

Violation of 

Title IV of the 

HEA 

20 USC 1082(g) October 2, 2012 August 1, 2016 $53,907 

Violation of 

Title IV of the 

HEA 

20 USC 

1094(c)(3)(B) 

October 2, 2012 August 1, 2016 $53,907 

Failure to 

disclose 

information to 

minor children 

and parents 

20 USC 

1228c(c)(2)(E) 

October 2, 2012 August 1, 2016 $1,591 

Improper 

lobbying for 

government 

grants and 

contracts 

31 USC 1352 

(c)(1) 

October 2, 2012 August 1, 2016 $18,936 to $189,261 

False claims 

and 

statements 

31 USC 

3802(a)(1) 

October 2, 2012 August 1, 2016 $10,781