OTHER

INFORMATION
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About the Other Information Section

The Other Information section includes:

O F F I C E O F I N S P EC TO R G E N E R A L’ S 

M A N AG E M E N T A N D P E R FO R M A N C E 

CHALLENGES

The Management and Performance Challenges Report 

provides a summary of what the Office of Inspector 

General (OIG) believes are the Department’s biggest 

challenges for FY 2022. The OIG identified the following 

five challenges: (1) Implementing the Coronavirus 

Aid, Relief, and Economic Security Act (CARES Act), 

(2) Oversight and Monitoring, (3) Data Quality and 

Reporting, (4) Improper Payments, and (5) Information 

Technology Security. The full report is available at the 

OIG website.

S U M M A RY O F F I N A N C I A L S TAT E M E N T 

AUDIT AND MANAGEMENT ASSURANCES

The Summary of Financial Statement Audit and 

Management Assurances provides information about 

the material weaknesses reported by the Department or 

through the audit process.

PAY M E N T I N T E G R I T Y I N F O R M AT I O N 

ACT REPORTING

This section summarizes the U.S. Department of 

Education’s (the Department) efforts to maintain payment 

integrity and to develop effective controls designed to 

prevent, detect, and recover improper payments. It also 

includes information regarding the Department’s high-risk 

programs.

C I V I L M O N E TA RY P E N A LT Y A D J U S T M E N T 

FOR INFLATION

This section reports on the Department’s annual inflation 

adjustments to civil monetary penalties as required 

under the Federal Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015.

THE G R A N T S OV E R S I G H T A N D N E W 

EFFICIENCY ACT O F 2 016 (G O N E 

AC T ) A N D E D U C AT I O N ’ S G R A N T 

CLOSEOUT PROCESS

This section provides a high-level summary of the 

Department’s expired, but not closed, federal grants and 

cooperative agreements.
114 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | MEMORANDUM FROM THE OFFICE OF INSPECTOR GENERAL

UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF INSPECTOR GENERAL

 THE INSPECTOR GENERAL

400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510

Promoting the efficiency, effectiveness, and integrity of the Department’s programs and operations.

TO: The Honorable Miguel Cardona

Secretary of Education

FROM: Bryon Gordon

Assistant Inspector General for Audit

SUBJECT: Management Challenges for Fiscal Year 2022 

In compliance with the Reports Consolidation Act of 2000, the U.S. Department of Education 

(Department) Office of Inspector General (OIG) reports annually on the most serious 

management and performance challenges faced by the Department. In addition to the

challenges themselves, these reports include a brief assessment of the Department’s progress 

in addressing the challenges and identity further actions that, if properly implemented, could 

enhance the effectiveness of the Department’s programs and operations. 

The Government Performance and Results Modernization Act of 2010 identifies major 

management challenges as programs or management functions that are vulnerable to waste, 

fraud, abuse and mismanagement and where a failure to perform well could seriously affect the 

ability of the Department to achieve its mission or goals. To identify management challenges, 

the OIG routinely examines past audit, inspection, and investigative work; reviews corrective 

actions that have not been completed; assesses ongoing audit, inspection, and investigative 

work to identify significant vulnerabilities; and analyzes new programs and activities that could 

post significant challenges because of their breadth and complexity. Our assessment also 

considers the accomplishments reported by the Department as of September 30, 2021. 

Our FY 2022 report identifies five management challenges facing the Department as it 

continues its efforts to promote student achievement and preparation for global 

competitiveness by fostering educational excellence and ensuring equal access. We specifically 

retained all five management challenges from our FY 2021 report. Although the Department 

made progress in addressing these challenges, our work continues to identify vulnerabilities 

within each of these areas. Additional challenges may exist in areas that we have not recently 

reviewed. 

We provided our draft report to Department officials and considered their comments in 

developing the final report. This report will be posted to our website at 

http://www2.ed.gov/about/offices/list/oig/managementchallenges.html. We look forward to 

working with the Department to address the FY 2022 management challenges in the coming 

year. If you have any questions or would like to discuss these issues, please contact me at (202) 

245-6051. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 115

Office of Inspector General’s (OIG) 

Management and Performance Challenges 

for Fiscal Year 2021

MANAGEMENT CHALLENGE 1—

IMPLEMENTING PANDEMIC RELIEF LAWS

The U.S. Department of Education (Department) was 

provided with more than $280 billion under three major 

pandemic relief laws to assist States, schools, school districts, 

and institutions of higher education (IHEs) in meeting 

their needs and the needs of students impacted by the 

pandemic. This included the Coronavirus Aid, Relief, 

and Economic Security (CARES) Act, enacted in March 

2020; the Coronavirus Response and Relief Supplemental 

Appropriations Act, 2021, enacted in December 2020; 

and the American Rescue Plan (ARP), enacted in March 

2021. Collectively, these laws established and funded 

new emergency relief programs, allowed the Department 

to provide State educational agencies (SEA) and local 

educational agencies (LEA) with waivers of certain statutory 

or regulatory requirements, and included provisions 

intended to provide borrowers with emergency relief. 

Why This Is a Challenge 

Implementation of the pandemic relief laws poses challenges 

for the Department as it must effectively oversee and monitor 

new grant programs and additional Federal education funds, 

implement additional student financial assistance program 

requirements, and ensure that quality data are reported. 

While these laws provide more than $161 million to the 

Department for student aid administration and $38 million 

for program administration, the Department must design 

and implement related processes timely and effectively to help 

ensure the overall success of its pandemic relief activities. In 

addition to the programs funded by the pandemic relief laws, 

the Department must oversee more than 100 other grant and 

loan programs, including a Federal student loan portfolio of 

about $1.5 trillion.

New Grant Programs and Additional Federal 

Education Funds 

As shown in Table 4, the pandemic relief laws included 

funding for State and local agencies, higher education, 

nonpublic schools, and other education-related entities. 

Table 4 

Education Stabilization Fund Summary

Program Funding Overview

Elementary and Secondary School 

Emergency Relief Fund (ESSER)

$190 billion ESSER funds are awarded to SEAs to provide formula-based subgrants to LEAs. ESSER 

funds can be used to support a wide range of activities, including purchasing and using 

technology for online learning, coordinating efforts with public health departments, 

addressing the needs of underrepresented student subgroups, planning for both school 

closures and reopenings, purchasing cleaning supplies, providing mental health services, 

and implementing summer learning and supplemental after-school programs.

Higher Education Emergency Relief 

Fund (HEERF)

$76.2 

billion

HEERF funds are awarded to IHEs. HEERF funds can be used to assist students with 

expenses related to the disruption of campus operations due to the pandemic, such as 

tuition, food, housing, healthcare, childcare, technology, and course materials; and to 

help IHEs, including Historically Black Colleges and Universities and Minority Serving 

Institutions, cover costs associated with significant changes to the delivery of instruction due 

to the pandemic, reimburse themselves for lost revenue resulting from the pandemic, and 

defray other expenses, such as those for faculty and staff trainings, payroll, campus safety 

measures and protocols, and student support activities.

Emergency Assistance to Nonpublic 

Schools (EANS)

$5.5 billion Awarded to Governor’s offices. EANS funds can be used to provide services or assistance 

to nonpublic schools.

Governor’s Emergency Education Relief 

Fund (GEER)

$4.3 billion GEER funds are awarded to Governors’ offices to provide to LEAs, IHEs, or other 

education-related entities that each Governor determines to be most impacted by the 

pandemic or deems essential. GEER funds can be used to support these entities’ ongoing 

operations and efforts to provide educational services to students.
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The pandemic relief laws also provided about $2.8 

billion in funds for the Outlying Areas, Tribal education 

agencies and programs operated or funded by the Bureau 

of Indian Education, and homeless children and youth. 

The ARP provided an additional $3 billion to States 

to support infants, toddlers, children, and youth with 

disabilities served under the Individuals with Disabilities 

Education Act. 

Each of these programs must be effectively implemented 

and monitored by the Department to ensure that the 

legislation is followed, and that States, elementary and 

secondary schools, and postsecondary institutions and 

students receive support in response to the pandemic. 

Effective oversight and monitoring of pandemic relief 

funds are critical to ensure that they are used for the 

purposes intended. Because these programs have different 

purposes, allowable uses of funds, and grant recipients, it 

is vital that the Department provides effective guidance, 

training, technical assistance, and outreach. These 

additional responsibilities pose a significant challenge 

to the Department given the large amount of funding 

involved, the number of entities receiving funds, and the 

need to administer its existing programs. Additionally, 

the Department must ensure that the primary recipients, 

such as Governors’ offices and SEAs, effectively fulfill their 

critical role in overseeing and monitoring subrecipients, 

such as LEAs.

Student Financial Assistance Program 

Requirements

The CARES Act included student financial assistance 

provisions intended to provide emergency relief to 

borrowers and to allow institutions to meet student 

needs more easily. These provisions included borrower 

and teacher assistance provisions, waivers of student 

financial assistance refunds and loan cancellations, and 

adjustments to lifetime Federal Pell Grant (Pell) and 

subsidized William D. Ford Federal Direct Loan (Direct 

Loan) usage. The Department had to provide guidance 

to and rely on postsecondary institutions, contracted 

servicers, collection agencies, guaranty agencies, and 

accrediting agencies to effectively implement these and 

other provisions. The Department may be challenged 

to provide adequate oversight of existing student aid 

program participants while it implements and oversees the 

student aid provisions in the CARES Act. Additionally, 

the Department faces the challenge of ensuring that 

postsecondary institutions continue to meet financial 

responsibility requirements, as the pandemic may 

negatively impact the enrollment and financial health of 

many institutions.

Data Quality

The pandemic relief laws included several reporting 

provisions that were intended to provide transparency 

regarding the use of funds to alleviate the impact of the 

Coronavirus Disease 2019 (COVID-19). The Department 

also established additional reporting requirements for 

programs authorized under these laws. Grantees must 

report monthly on subcontracts and subgrants exceeding a 

certain threshold and submit annual performance reports. 

Administering the programs and operations funded by 

the pandemic relief laws requires the Department to 

collect, analyze, and report on data for many purposes, 

such as evaluating programmatic performance, assessing 

fiscal compliance, and informing management decisions. 

For this reason, the Department, its grant recipients and 

subrecipients, and other program participants must have 

effective systems, processes, and procedures in place to 

ensure that the reported data are accurate and complete. 

The Office of Inspector General’s (OIG) recent audit work 

within this area is shown in Table 5.
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Table 5

OIG’s Recent Reports Relating to Pandemic Relief Laws

Activities Reviewed Review Results

HEERF We have issued three reports relating to HEERF funds.

In the first two audits from a series of work on postsecondary schools’ use of HEERF funds, we found that two schools 

generally used the Student Aid portion of their HEERF funds for allowable and intended purposes but did not always use 

the Institutional portion of their funds in accordance with Federal requirements. We also found that both schools did not 

minimize the time between drawing down and disbursing HEERF funds nor deposit excess funds in an interest-bearing 

account, contrary to Federal regulations.

We issued a flash report on HEERF-related risks that shared observations on closed schools that received or had access 

to HEERF funds. We found that 17 schools that had closed on or before December 31, 2020, applied for and were 

awarded more than $4.9 million in HEERF funds. We also noted that eight of those schools had drawn about $1.26 million 

from these grants after closure dates listed in a Department system.

Student Financial 

Assistance Program 

Requirements

We found that Federal Student Aid (FSA) took quick action to implement processes that generally achieved positive results 

in suspending and refunding most involuntary collections on defaulted Department-held loans. We specifically determined 

that that FSA suspended administrative wage garnishments and the Treasury offsets for over 96 percent of the borrowers 

that FSA collected payments for within 90 days of the start of the suspension period. We also found that FSA refunded 

99 percent of administrative wage garnishments and Treasury offsets that were collected from March 13, 2020, through 

September 30, 2020. Although FSA refunded most administrative wage garnishments and Treasury offsets collected for 

the period of our review, it did not reprocess all refunds that were subsequently returned to Treasury and did not refund 

all wage garnishments and Treasury offsets collected. In addition, FSA did not develop procedures to obtain and track the 

U.S. Department of Justice’s progress on suspending and refunding involuntarily collections on defaulted Departmentheld loans.

Data Quality and 

Reporting

We issued a flash report on Education Stabilization Fund reporting in the Federal Audit Clearinghouse regarding 

the inconsistent reporting of subprogram expenditures by grantees and subgrantees. This included instances where 

subprograms were not identified and variations in the information that was used to identify subprograms. 

In our work relating to HEERF reporting requirements, we found that 81 of the 100 recipients included in our nonstatistical 

sample complied with HEERF Institutional portion reporting requirements. However, we were unable to locate Institutional 

portion reports on the websites of the 19 other recipients. As of September 30, 2020, those 19 recipients had drawn down 

over $5.5 million of the almost $29 million awarded to them. 

Our work on postsecondary schools’ use of HEERF funds also reviewed the timeliness and quality of the data that two 

schools reported on their use of HEERF funds. We found that the information in both school’s required HEERF reports 

were generally accurate, complete, and timely.

Department Operations Our assessment of the Department’s reconstitution plans following COVID-19 found the Department generally incorporated 

available guidance, which was intended to provide for a safe and gradual return to Federal offices, in its Workplace 

Reconstitution Transition Plan. However, we noted that the Department did not address anti-retaliation, including practices 

for ensuring that no adverse or retaliatory action is taken against an employee who adheres to guidelines or raises 

workplace safety and health concerns, and did not periodically reassess and update self-screening questions as suggested 

by available guidance.

We issued a Management Information Report that identified challenges that the Department may face as it implements 

and oversees the CARES Act. These included grantee oversight and monitoring, student financial assistance oversight 

and monitoring, and data quality and reporting. We noted that the Department should consider these persistent challenges 

and the lessons learned from its administration of the Recovery Act as it implements and administers the programs and 

provisions authorized under the CARES Act to reduce vulnerabilities to fraud, waste, abuse, noncompliance, and other 

issues that could impact a grantee’s or subgrantee’s ability to achieve intended programmatic results.

Ongoing and Planned Work

Our ongoing work in this area includes reviews of one State’s use of ESSER funds, LEAs’ use of ESSER funds for 

technology, the Department’s award of duplicate HEERF grants, a third school’s use of HEERF funds, the Department’s 

oversight of HEERF funds, States’ plans for using GEER funds, three States’ awarding and monitoring of GEER funds, and 

the Department’s processes for implementing flexibilities to Teacher Education Assistance for College and Higher Education 

grant service obligations.

Our planned projects relating to State and local programs within this area for fiscal year (FY) 2022 include reviews of 

additional States’ uses of ESSER funds, the Department’s oversight of ESSER funds, recipients processes for awarding and 

monitoring GEER funds, and recipients’ allocation and use of ARP homeless children and youth funds. 
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Our planned projects relating to student financial 

assistance and higher education programs within this area 

for FY 2022 include reviews of FSA’s transition of Federal 

student loan borrowers back into repayment after the 

relief measures implemented in response to the pandemic 

expire, FSA’s processes for the return of Title IV funds, 

cancellation of borrower loans, and exclusion of subsidized 

loan usage and Pell lifetime usage, and school’s compliance 

with the return of Title IV waiver requirements.

We also plan to perform work relating the Department’s 

use or planned use of its supplemental pandemic-related 

program administration funding. 

Progress in Meeting the Challenge 

Regarding new grant programs, additional Federal 

education funds, and related data quality, the Department 

stated that it took comprehensive steps to ensure 

appropriate interpretation of the legislative requirements 

and subsequent policy and operational implications. 

The Department noted that the Office of Finance and 

Operations and the Office of Planning, Evaluation, and 

Policy Development coordinated Department efforts to 

make COVID-19 relief awards on expedited grantmaking 

timelines on top of the ongoing administration of the 

agency’s more than $70 billion annual portfolio of existing 

programs. The Department further added that it leveraged 

the COVID-19 excepted service hiring authority to help 

address the additional administrative, monitoring, and 

oversight workload associated with administering the 

pandemic relief funding.

The Department identified strategies it had taken to 

provide support to grantees that included (1) establishing 

structured processes for data collection and reporting; 

(2) implementing preventative internal controls, (3) 

adopting risk-based approaches to administering funds 

and monitoring, (4) providing training, guidance, 

and technical assistance to new grantees, and (5) 

working to ensure relevant programs were included in 

guidance used by independent third-party auditors. The 

Department added that it issued early and comprehensive 

communications to grantees outlining data quality and 

timing expectations. It further noted that lessons learned 

from the initial ESF grantee data collection experience 

significantly informed the processes for the year two 

collection and that that these collections will enable it to 

better assess the use of funds and provide visibility into the 

equitable recovery of schools and students.

Regarding student financial assistance program 

requirements, the Department stated that it worked 

to implement COVID-19-related relief that included 

suspending Federal loan payments and stopping Federal 

wage garnishments and collection actions for borrowers 

with Federally held loans in default. The Department 

added that FSA worked with loan servicers to ensure all 

eligible borrowers received personalized communications 

informing them of these changes. With respect to the 

suspension of loan payments, the Department stated 

that it placed all borrowers in administrative forbearance 

status, which allowed them to temporarily stop making 

monthly loan payments. The Department added that once 

the payment suspension period ends, all non-defaulted 

borrowers in the Federal student loan portfolio will be 

in a current repayment status. With respect to stopping 

wage garnishments and collection actions, the Department 

stated that FSA refunded more than 99 percent of 

involuntary payments.

What the Department Needs to Do 

To effectively oversee the Pandemic Relief programs, the 

Department should assess the results of its monitoring 

efforts and information reported back from recipients 

to identify potential problem areas or areas that could 

benefit from additional guidance or technical assistance. 

Given the importance of spending these funds quickly and 

appropriately, it is important for the Department to obtain 

timely and accurate information and to respond quickly 

to emerging challenges identified by its monitoring and 

oversight, or work performed by Federal and non-Federal 

auditors. Continuing to use a lessons-learned approach, 

like the one cited above on its change to 2-year data 

collection strategy, is a good way for the Department to 

continue to learn from and act on emerging issues. 

To implement the student financial assistance related 

statutory provisions, waivers, and flexibilities, the 

Department needs to continue to provide guidance to and 

work with postsecondary institutions, contracted servicers, 

collection agencies, guaranty agencies, and accrediting 

agencies. The Department also needs to monitor and 

oversee these entities to ensure that the provisions 

are implemented effectively. Importantly, when these 

provisions expire, the Department will need to carefully 

reinstate the student loan provisions for which the relief 

was temporarily provided. 
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M A N AG E M E N T C H A L L E N G E 2 — OV E R S I G H T 

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 stakeholders. Two subareas are included in 

this management challenge: student financial assistance 

programs and grantees. 

Oversight and Monitoring—Student Financial 

Assistance Programs 

FSA, a principal office of the Department, seeks to ensure 

that all eligible individuals can benefit from Federal 

financial assistance for education beyond high school. 

FSA is the nation’s largest provider of student financial aid 

and is responsible for implementing and managing the 

Federal student financial assistance programs authorized 

under Title IV of the Higher Education Act of 1965, 

as amended. These programs provide grants, loans, and 

work-study funds to students attending colleges or career 

schools. FSA directly manages or oversees a loan portfolio 

of over $1.5 trillion, representing about 212 million 

student loans to more than 45 million borrowers. FSA also 

oversees more than 5,600 postsecondary institutions that 

participate in the Federal student aid programs. 

In FY 2020, FSA performed these functions with 

an administrative budget of $1.8 billion and about 

1,400 employees, along with contractors that provide 

outsourced business operations. From FY 2016 to 

FY 2020, FSA delivered an average of $121.6 billion in 

Federal student aid to an average of 12.0 million students.

Figure 13

Student Aid Delivered and Postsecondary Students Receiving Aid FYs 2016–2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2016 FY 2017 FY 2018 FY 2019 FY2020

 

Total Federal Student

Aid Delivered (in

billions of $)

$125.7 $122.5 $122.4 $121.8 $115.6

 

Total Postsecondary

Students Receiving

Aid (in millions)

13.2 12.9 12.7 10.4 10.8

Source: Federal Student Aid Annual Report FY 2020 
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Within the Department, FSA administers the Federal student assistance programs, and the Office of Postsecondary 

Education develops Federal postsecondary education policy and regulations for the Federal student assistance programs. 

The Office of Postsecondary Education also administers the review process for accrediting agencies to ensure that the 

Department recognizes only agencies that are reliable authorities for evaluating the quality of education and training 

postsecondary institutions and programs offer.

Why This Is a Challenge

The Department must provide effective oversight and monitoring of the student financial assistance programs to ensure 

that the programs are not subject to fraud, waste, and abuse. The Department’s responsibilities include coordinating and 

monitoring the activity of many Federal, State, nonprofit, and private entities involved in Federal student aid delivery, 

within a statutory framework established by Congress and a regulatory framework established by the Department. These 

entities include lenders, guaranty agencies, postsecondary institutions, contracted servicers, collection agencies, and 

accrediting agencies. 

Audits Relating to Student Financial Assistance Programs 

Our audits involving the oversight and monitoring of student financial assistance programs continue to identify instances of 

noncompliance as well as opportunities for the Department to further improve its processes. The OIG’s recent work within 

this area has covered a wide range of activities, as shown in Table 6.

Table 6

OIG’s Recent Reports Relating to the Oversight and Monitoring of Student Financial Assistance Programs

Activities Reviewed Review Results

Accreditation In an audit of the Department’s processes for accessing the Accrediting Council for Independent Colleges and School’s 

compliance with Federal regulatory criteria for recognition from 2016 through 2018, we determined that the Department did 

not comply with all regulatory requirements during its 2016 review of the Accrediting Council for Independent Colleges and 

School’s petition for recognition renewal because its process did not consider all available relevant information during its 

review as required. We also determined that the Department implemented a process for assessing the Accrediting Council 

for Independent Colleges and School’s compliance with recognition criteria following a court remand in 2018 that was 

permitted under applicable policies and regulations as well as the court’s remand order.

Contractor Oversight In our audit of FSA’s oversight of loan servicers, we found that FSA did not track all identified instances of loan servicer 

noncompliance and rarely held loan servicers accountable for noncompliance with requirements. We also noted that the 

information FSA collected was not always sufficient to ensure that loan servicers complied with requirements for servicing 

Federally held student loans. 

In an audit of FSA’s contractor personnel security clearance process, we found that FSA had not effectively implemented 

Department requirements to ensure that all contractor employees had appropriate security screening.

Heightened Cash 

Management

We found that FSA consistently administered its heightened cash monitoring payment methods when utilizing this process 

for one of the top five reasons. We also concluded that FSA’s use of heightened cash monitoring was an effective oversight 

tool. However, we noted opportunities for FSA to improve its controls to better ensure that it (1) consistently places schools 

on a heightened cash monitoring payment status when they submitted late annual financial statements or had composite 

scores that fell below the minimum financial responsibility score, (2) tracks a school’s method of payment status from 

the time of recommendation for heightened cash monitoring placement until the placement was made, and (3) retains all 

required documentation.

Professional Judgment In the first of a series of audit work in this area, we found that a school did not adequately document special circumstances 

for more than 90 percent of the students in our nonstatistical random sample for whom it applied professional judgment. 

Because the school did not adequately document special circumstances, its application of professional judgment was not in 

accordance with the Higher Education Act of 1965, as amended.
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Activities Reviewed Review Results

Sales of 

Postsecondary 

Schools

We found that the Department did not take actions sufficient to mitigate significant financial responsibility and administrative 

capability risks posed by buyer and the 13 for-profit postsecondary schools that were purchased in transactions occurring 

in November 2017 and February 2018. We also found that the Department did not follow several of its procedures 

relating to subsequent activities involving those schools. For example, the Department retroactively approved temporary 

interim nonprofit statuses for 2 of the 13 schools, to avoid a lapse in their eligibility to participate in the Title IV programs, 

without following its own procedures for ensuring that schools meet the regulatory definition of a nonprofit school. The 

Department also did not follow FSA’s financial analysis procedures when it limited a letter of credit requirement despite 

lacking certain documentation for a transaction involving the resale of 4 of the 13 schools in 2019. We also found that the 

Department did not follow FSA policy when it extended the temporary provisional program participation agreements for 

the four schools without receiving evidence that the accrediting agencies and all State authorizing agencies had approved 

the changes in ownership. We also determined that the Department allowed the use of surety funds to pay the operating 

expenses of schools that were planned to close in December 2018. Allowing surety funds to be used for such purposes was 

unprecedented, and neither the Department nor FSA had policies or procedures for such a situation. Finally, we found that 

the Department’s standard procedures were not rigorous enough to ensure the purchaser’s compliance with requirements 

for drawing down and disbursing Title IV funds, including the payment of credit balances. 

Satisfactory Academic 

Progress We found that FSA did not always ensure that schools completed corrective actions related to satisfactory academic 

progress findings that independent public accountants identified in compliance audits and FSA identified in 

program reviews.

Total and Permanent 

Disability (TPD) 

Discharges

We found that FSA appropriately approved and rejected TPD applications and its contractor generally serviced TPD 

accounts in accordance with Federal program requirements. However, we identified design weaknesses in FSA’s control 

activities for the TPD discharge application review process that may negatively affect the operating efficiency and 

effectiveness of the process and increase the risk that FSA approves applications that are inaccurate or incomplete. We 

also found weaknesses in FSA’s documented procedures and its quality control review for its TPD discharge application 

review process, as well as weaknesses in FSA’s monitoring of the TPD discharge process.

Verification of Free 

Application for Federal 

Student Aid (FAFSA) 

Data

We completed a series of eight audits within this area. 

In our review of FSA’s controls over the school verification process, we found that FSA implemented five significant control 

activities over schools’ processes for completing verification procedures and reporting verification results. However, we 

determined that FSA did not monitor 4 of those control activities on a regular basis and did not address all of the control 

issues identified in a separate internal evaluation of its processes to ensure schools performed verification. In a sperate 

audit, we found that FSA did not evaluate its process for selecting Free Application for Federal Student Aid data elements 

that schools were required to verify and generally did not effectively evaluate and monitor its processes for selecting 

students for verification. 

We also performed a series of external audits of selected schools to assess their compliance with Federal verification and 

reporting requirements. Of six schools covered by these audits, three did not always complete verification of applicant data 

in accordance with Federal requirements, and two did not always accurately report verification results to FSA.
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Investigations of Student Financial Assistance Program Participants

The OIG’s investigative recent work continues to identify fraud, waste, and abuse of student financial assistance program 

funds. This includes each of the areas in Table 7.

Table 7

OIG’s Recent Investigative Activity Relating to the Student Financial Assistance Programs

Area Example of Related Investigative Activity

Institutions OIG investigations have identified instances where schools violated the Federal ban on incentive compensation. Title IV of the 

Higher Education Act prohibits any institution that receives Federal student aid from compensating student recruiters with a 

commission, bonus, or other incentive payment based on the recruiters’ success in securing student enrollment. The incentive 

compensation ban protects students against admissions and recruitment practices that serve the financial interests of the 

recruiter rather than the educational needs of the student.

School Officials OIG investigations identified improper activities of school officials that included falsifying student eligibility information, 

embezzling portions of student’s Federal student financial assistance awards, using a corporate credit card for personal 

benefit, and overriding academic holds on students’ financial aid records to allow improper award and disbursement of Federal 

student assistance.

Program 

Participants

OIG investigations identified instances where program participants gave kickback payments in exchange for unjustified financial 

aid payments, used fraudulently obtained social security numbers to obtain direct loans, and made false claims of earning a high 

school diploma to receive student financial assistance.

Distance 

Education Fraud 

Rings

Fraud rings are large, loosely affiliated groups of criminals who seek to exploit vulnerabilities in distance education programs. 

The OIG has investigated numerous instances where these groups use the identities of others (with or without their consent) to 

fraudulently obtain Federal student aid.

Ongoing and Planned Work

Our ongoing work in this area includes reviews of three additional school’s use of professional judgment, FSA’s transition 

to the Next Generation Loan Servicing Environment, and a school’s compliance with career pathways and ability to benefit 

provisions. Additional planned projects for FY 2022 include reviews of FSA’s processes for overseeing proprietary school 

compliance with 90/10 revenue requirements, FSA’s oversight of its contractor’s acceptability review process for proprietary 

school annual audits, FSA outreach to individuals who belong to underserved communities, and the Department’s reporting 

on experimental sites initiatives. 

Progress in Meeting the Challenge

The Department identified actions it had taken or plans to take to improve its activities relating to the oversight and 

monitoring of the student financial assistance programs. This included items relating to IHEs participating in Title IV 

programs, accrediting agencies, and the FAFSA verification process. The Department also noted that recent legislation will 

allow it to better verify financial data and oversee the Pell program.

With respect to the oversight and monitoring of IHEs, the Department stated that FSA worked to address weaknesses in 

the single audit process to improve its use as an oversight and monitoring tool for IHEs’ disbursements of Pell Grants and 

Direct Loans. The Department also noted that FSA deployed an analytical model to continually monitor partner data and 

performance that improved its ability to identify IHEs most at-risk and allow more effective use of oversight resources.

Regarding accrediting agencies, the Department stated that it planned to implement additional risk-based procedures to 

evaluate an agency’s ability to effectively determine IHE compliance with standards and to identify agencies at higher risk 

of failing to meet statutory and regulatory requirements. These evaluations would allow FSA to prioritize the oversight of 

higher-risk agencies.
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The Department added that FSA implemented an 

improved model for verification selection and evaluation 

of data elements from the FAFSA that allows the 

Department to better identify applicants for whom 

errors will result in a change in their Federal aid award, 

potentially reducing improper payments.

The Department also stated that the Fostering 

Undergraduate Talent by Unlocking Resources for 

Education Act will help it ensure the accuracy of income 

information used for determining Pell Grant eligibility. 

The Department noted that the Act allows it to receive 

income tax data more easily from the Internal Revenue 

Service and related processes will be implemented in stages 

through FY 2023.

What the Department Needs to Do

The Department’s reported progress and actions are 

responsive to suggestions we have made in previous reports 

and indicate that it has made progress to improve oversight 

of its student financial assistance programs, participants, 

and partners. While there has been progress, this continues 

to be a challenge area as evidenced by our audit work. 

We reiterate that the Department further needs to 

ensure its oversight functions work together to effectively 

provide the intended additional protections to students 

and taxpayers. Also, while FSA’s Next Gen initiative has 

significant potential to improve FSA’s ability to oversee 

and hold accountable its key contractors servicing Federal 

student aid, it will be important for FSA to ensure that 

this initiative is effectively implemented, and once in place 

that it follows through to hold its contractors accountable 

for effectively administering their responsibilities. As 

the Department continues to make improvement in its 

oversight efforts, it will be important for it to assess the 

effectiveness of its initiatives by setting goals for and 

measuring results that demonstrate progress of its efforts. 

Our audits and investigations of student financial 

assistance program participants and audits of the 

Department’s related oversight and monitoring processes 

will continue to assess a variety of effectiveness and 

compliance elements. This area remains a management 

challenge given our continued findings in this area.

Oversight and Monitoring—Grantees

The Department is responsible for administering education 

programs that Congress authorized and the President signed 

into law. This responsibility includes awarding program 

funds to eligible recipients and monitoring their progress 

in meeting program objectives, ensuring that programs 

are administered fairly, ensuring grants are executed in 

conformance with both authorizing statutes and laws 

prohibiting discrimination in Federally funded activities, 

collecting data and conducting research on education, and 

helping to focus attention on education issues of national 

importance. The funding for many grant programs flows 

through primary recipients, such as SEAs, to subrecipients, 

such as LEAs or other entities. The primary recipients must 

oversee and monitor the subrecipients’ activities to ensure 

compliance with Federal requirements.

The Department’s early learning, elementary, and secondary 

education programs annually serve about 17,000 school 

districts and more than 56 million students attending 

more than 98,000 public schools and 32,000 private 

schools. The Department awards discretionary grants 

using competitive processes and priorities and formula 

grants using formulas established by Congress. In all cases, 

the Department’s activities are governed by the program 

authorizing legislation and implementing regulations. One 

of the key programs the Department administers is Title I, 

Part A, which provided about $16.5 billion in FY 2021 for 

local programs that provide extra academic support to help 

an estimated 25 million students in high-poverty schools 

meet State academic standards. Another key program is the 

Individuals with Disabilities Education Act, Part B Grants 

to States. This program provided more than $12.9 billion in 

FY 2021 to help States and school districts meet the special 

educational needs of an estimated 7.6 million students 

with disabilities.

Why This Is a Challenge

Effective monitoring and oversight are essential to ensure 

that grantees meet grant requirements and achieve program 

goals and objectives. Our recent audits related to several 

grant programs identified weaknesses in grantee oversight 

and monitoring that included concerns with SEA and LEA 

controls and Department oversight processes.
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Audits Relating to Federal Education Grant Programs 

Our recent audits at the SEA and LEA levels identified weaknesses that could have been limited through more effective 

oversight and monitoring. The internal control issues identified within these areas could impact the effectiveness of the 

entities reviewed and their ability to achieve intended programmatic results. This included work related to the programs and 

activities identified in Table 8.

Table 8

OIG’s Recent Reports Relating to SEA or LEA Implementation of Federal Education Grant Programs

Activities Reviewed Review Results

Charter Schools We have issued two audit reports relating to Charter Schools Program Grants for the Replication and Expansion of HighQuality Charter Schools. We found that two nonprofit charter management organizations did not fully comply with Federal 

grant reporting requirements and did not charge only adequately documented and allowable expenditures to their grants.

Disaster Recovery We have issued seven reports relating to disaster recovery funding authorized under the Bipartisan Budget Act of 2018. 

Our work at two SEAs relating to internal controls over the Immediate Aid to Restart School Operations (Restart) program 

identified weaknesses in programmatic monitoring processes, internal audit division staffing, processes to assess fraud 

risks, internal controls over procurement, and segregation of duties. 

Our work at two SEAs relating to Restart allocations and uses of funds found that one SEA established and implemented 

effective controls over Restart allocations and uses of funds. However, we identified instances of noncompliance that 

included one district inappropriately charging unallowable personnel expenditures to the program and failure by another 

entity to obtain control and ownership of materials at nonpublic schools funded by the Restart program. We found that 

another SEA also established and implemented effective controls over Restart allocations and uses of funds but could 

better maintain and manage its records for the Restart program.

Our work at two SEAs relating to the Temporary Emergency Impact Aid for Displaced Students (EIA) program found that 

both SEAs did not ensure that the displaced student count data provided to the Department were accurate and complete or 

that LEAs accounted for EIA program funds received for students reported as children with disabilities in accordance with 

Federal requirements. We also found that one SEA did not ensure that LEAs used Emergency Impact Aid program funds to 

pay salaries only for employees who supported schools with displaced students.

We issued a Flash Report on the risk of a SEA’s unallowable use of EIA funds. We found that the SEA may have charged 

up to $1.3 million in payrolls costs to the EIA program for employees who were not employed by the SEA during the accrual 

periods applicable to the payments.

Individuals 

with Disabilities 

Education Act

We have issued two audit reports relating to SEAs’ and selected LEAs’ development and implementation of individualized 

education programs (IEP) for children with disabilities who attend virtual charter schools. We found that both SEAs 

generally had sufficient internal controls to ensure that LEAs developed IEPs in accordance with Federal and State 

requirements for children with disabilities who attend virtual charter schools and that these students were provided with 

the services described in their IEPs. However, we identified weaknesses at selected LEAs that included insufficient 

written procedures for IEP development and documenting the delivery of services, not ensuring that they maintained IEPs 

that included all of the required information describing the services that students needed, and not maintaining sufficient 

documentation to support that all special education services that were outlined in IEPs were provided.
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Our recent audits of the Department’s oversight and monitoring processes over several grant programs identified internal 

control weaknesses and opportunities for improvement. These weaknesses could limit the Department’s ability to ensure 

that grantees demonstrated progress towards meeting programmatic objectives and properly safeguarded and used Federal 

education funds. As noted in Table 9, our work included audits within several areas.

Table 9

OIG’s Recent Reports Relating to the Department’s Oversight and Monitoring of Federal Education

Grant Programs

Area Reviewed Review Results

Disaster Recovery We found that the Department designed policies and procedures that should have provided reasonable assurance that it 

awarded and monitored Defraying Costs of Enrolling Displaced Students in Higher Education Program and Emergency 

Assistance to Institutions of Higher Education Program funds in accordance with applicable guidance. However, we found 

that the Department did not implement all processes and risk mitigation strategies as designed. As a result, the Department 

inappropriately awarded funds to some of the grantees whose applications we reviewed.

Every Student 

Succeeds Act

We found that the Department designed processes that would provide reasonable assurance of identifying and resolving 

potential instances of State plans’ noncompliance with applicable requirements and complying with Department policy. 

However, the Department did not always implement these processes as designed. As a result, we could not determine 

why the Department selected certain peer reviewers, could not ensure that the Department considered conflict of interest 

information it collected from peer reviewers before assigning them to panels, and could not always determine whether the 

Department considered the results of the peer review process when providing States feedback to strengthen the technical 

and overall quality of their plans.

Investigations of Federal Education Grant Program Participants

The OIG’s recent investigative work continues to identify fraud relating to Federal education grant programs. This includes 

the areas identified in Table 10.

Table 10

OIG’s Recent Investigative Activity Relating to Federal Education Grant Programs

Subject Area Example of Related Investigative Activity

Contractors OIG investigations identified instances where contractors invoiced for services that it did not perform, fraudulently obtained 

contracts, committed bribery, and made kickback payments.

LEA Officials OIG investigations identified instances where LEA officials allowed fraudulent credit card use in exchange for kickbacks, 

embezzled cash, and executed a scheme to obtain funds for personal use by creating false invoices and issuing 

fraudulent checks.

Charter School 

Officials

OIG investigations identified instances involving charter school founders and senior officials who participated in conspiracy, 

fraud, theft, money laundering, false bankruptcy declarations, and other scams, abusing their positions of trust for 

personal gain.

Ongoing and Planned Work

Ongoing work in this area includes reviews of two additional SEAs’ administration of the EIA program, a SEA’s allocation 

and use of Restart funds, selected schools’ use of Emergency Assistance to Institutions of Higher Education program funds, 

the effectiveness of Charter School Program grants, and the Department’s oversight of Charter School Program Grants for 

Replication and Expansion of High-Quality Charter Schools. Planned projects for FY 2022 include reviews of selected 

SEAs’ implementation of Statewide accountability systems and the Department’s implementation of its rule concerning 

equity in the Individuals with Disabilities Education Act. 
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Progress in Meeting the Challenge

The Department stated that it has continued to prioritize 

enhancing its processes related to grant oversight and 

monitoring to achieve positive program outcomes. 

The Department noted that it has strengthened and 

modernized the grants administration process through 

recent innovation, process overhauls, and technology 

improvements. The Department noted that these efforts 

emphasized capacity building and collaboration across 

grants staff to improve oversight and monitoring. 

The Department identified several strategic efforts 

within this area that included: identifying opportunities 

for coordination and information sharing across offices 

to improve efficiency and effectiveness, establishing 

new virtual monitoring and support approaches for 

discretionary and formula grant programs, developing and 

implementing in-house training resources, and leveraging 

contract support to increase online training resources 

for grantees.

The Department also noted that a grants management 

system modernization initiative was underway to better 

meet stakeholder needs throughout the grant lifecycle. 

The Department further stated that it has partnered with 

the Department of Health and Human Services to pilot 

emerging solutions that could further strengthen and 

streamline future risk-based monitoring strategies.

What the Department Needs to Do

The Department continues to report progress in enhancing 

its grantee oversight processes, citing numerous actions it 

has taken to address risks, including those identified in a 

number of OIG audit reports, and to improve outcomes 

across multiple program offices. Given our ongoing 

findings under this challenge area, we reiterate that the 

Department should continue its efforts to offer common 

training, encourage collaboration and communication 

within and across program offices, and take steps to ensure 

that its program offices are consistently providing effective 

risk-based oversight of grant recipients—to include both 

technical assistance and monitoring. The Department 

should especially focus on the actions taken by passthrough entities to provide oversight of their subrecipients. 

Lastly, it is important for the Department to continue 

to explore ways to more effectively leverage the resources 

of other entities that have roles in grantee oversight, 

including those conducting single audits under the Office 

of Management and Budget (OMB) 2 Code of Federal 

Regulations 200, Subpart F, given its generally limited 

staffing in relation to the amount of Federal funding that 

it oversees.

M A N AG E M E N T C H A L L E N G E 3 — D ATA 

Q U A L I T Y A N D R E P O R T I N G 

The Department collects, analyzes, and reports on 

data for many purposes that include enhancing the 

public’s ability to access high-value education-related 

information, reporting on programmatic performance, 

informing management decisions, and improving 

education in the United States. The Department collects 

data from numerous sources, including States, which 

compile information relating to about 17,000 public 

school districts and 98,000 public schools; about 6,000 

postsecondary institutions, including universities and 

colleges, as well as institutions offering technical and 

vocational education beyond the high school level; 

and surveys of private schools, public elementary and 

secondary schools, students, teachers, and principals. 

Why This Is a Challenge

The Department, its grantees, and its subrecipients must 

have effective controls to ensure that reported data are 

accurate and complete. The Department relies on program 

data to evaluate program performance and inform 

management decisions. 
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Audits and Inspections Involving Data Quality and Reporting 

Our recent audit work identified a variety of weaknesses in the quality of reported data and recommended improvements at 

the Department and at SEAs and LEAs. This included the following areas, as shown in Table 11.

Table 11

OIG’s Recent Data Quality Related Reports

Area Reviewed Review Results

Charter Schools We have issued two audit reports relating to Charter Schools Program Grants for the Replication and Expansion of 

High-Quality Charter Schools. We found that both recipients did not include complete and accurate information for all 

performance measures on which they were required to report in three annual performance reports. We also found that both 

recipients did not always retain records that supported the performance measures that they reported to the Department.

Clery Act We found that two postsecondary intuitions did not have effective controls to ensure they reported complete and accurate 

Clery Act crime statistics. We concluded that both school’s Clery Act crime statistics were not complete and accurate and as 

a result neither school provided reliable information to current and prospective students, their families, and other members 

of the campus community for making decisions about personal safety and security.

Disaster Recovery We found that two SEAs did not ensure that the displaced student count data provided to the Department under the EIA 

program were accurate and complete. This included instances where students who did not change schools or not did not 

transfer from a disaster area were included in displaced student counts.

Pandemic Relief We found inconsistent reporting of subprogram expenditures by grantees and subgrantees in the Federal Audit 

Clearinghouse. This included instances where subprograms were not identified and variations in the information that was 

used to identify subprograms. As a result, Federal award expenditure data at the subprogram level cannot be reliably used 

by the Department and associated data on areas such as audit results, audit findings, and corrective action plans are not 

consistently reported at the subprogram level. 

In our work relating to HEERF reporting requirements, we were unable to locate Institutional Portion reports on the websites 

of the 19 percent of the recipients included in our nonstatistical sample. We also found that 22 percent of the recipients in 

our sample that reported expenditures in the ‘Other Uses’ category did not follow Department instructions or did not provide 

sufficient detail.

Ongoing and Planned Work

Ongoing work in this area includes reviews of two additional SEAs’ reported displaced student count data under the EIA 

program, an SEA’s allocation and use of Restart funds, State plans for using GEER funds, the effectiveness of Charter School 

Program grants, and the Department’s compliance under the Digital Accountability and Transparency Act. Planned projects 

for FY 2022 include reviews of selected SEAs’ implementation of Statewide accountability systems. 

Progress in Meeting the Challenge

The Department stated that it is committed to improving the access, use, and dissemination of meaningful education data 

to inform decision making. The Department also noted numerous activities that it has taken to address this challenge and 

emphasized its commitment to protecting students’ education data. 

The Department’s actions included multiple internal activities such as formalizing data management functions through 

data governance policies, implementing data maturity assessments, and developing a data workforce plan. The Department 

identified additional activities such as developing a Data Quality Playbook that outlined authorities, tools, and resources for 

grant program managers. The Department further identified activities to collaborate and engage with external entities that 

included work with the IRS to implement programmatic changes to ensure accuracy of income data used for determining 

Pell Grant eligibility.

The Department stated that the National Center for Education Statistics continues to focus on models for data quality 

improvement to support Department-wide program data collections. This included efforts to improve the completeness and 

accuracy of EDFacts data and the timeliness of SEA’s submissions. The Department noted specific accomplishments that 

included the refinement of data collection guidance and the publication of a Business Rules Single Inventory.
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What the Department Needs to Do

The Department continues to take actions to improve 

the quality of data. While the Department has made 

progress in strengthening grantees’ data quality 

processes, we continue to report findings in this area. 

The Department should continue its efforts to promote 

strong data management practices across its program 

offices, from the development of sound data collection 

protocols to the implementation of comprehensive data 

verification processes.

As discussed in its response, the Department should ensure 

that it uses the results of its data maturity assessments 

to measure progress and growth toward its data quality 

goals. The Department should also continue performing 

outreach to States and other entities that report data to the 

Department to reinforce requirements and expectations 

around good data quality practices—of particular 

importance given the substantial amount of funding 

for new programs and emphasis on transparency and 

accountability under pandemic relief programs. Lastly, the 

Department should continue to monitor the quality of the 

data it receives, work to implement effective controls to 

address known weaknesses, and take steps to ensure that 

strong data management practices are implemented across 

the Department as well as by its grantees and subgrantees.

MANAGEMENT CHALLENGE 4—

IMPROPER PAYMENTS

“Improper payments” are payments the government 

makes to the wrong person, in the wrong amount, or for 

the wrong reason. Although not all improper payments 

are fraudulent or represent a loss to the government, all 

improper payments degrade the integrity of government 

programs and compromise citizens’ trust in government.

To reduce instances of improper payments, agencies must 

properly identify the cause of the improper payment, 

implement effective mitigation strategies to address 

the cause, and regularly assess the effectiveness of those 

strategies, refining them, as necessary.

The Payment Integrity Information Act of 2019 (PIIA), 

reorganized and revised several existing improper 

payments statutes, including the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA). PIIA 

requires Federal agencies to reduce improper payments 

and to report annually on their efforts. It specifically 

requires that each agency, in accordance with guidance 

prescribed by OMB, periodically review all programs and 

activities that the agency administers and identify those 

that may be susceptible to significant improper payments. 

For each program and activity identified as susceptible 

to significant improper payments, the agency is required 

to produce a statistically valid estimate (or an estimate 

that is otherwise appropriate using a methodology that 

OMB approved) of the improper payments made by each 

program and activity. The agency must include those 

estimates in the accompanying materials to its annual 

Agency Financial Report. 

PIIA also requires each agency’s Inspector General to 

determine the agency’s compliance with the statute for 

each fiscal year. To be considered compliant with PIIA, 

an agency must (1) publish an Agency Financial Report; 

(2) conduct a program-specific risk assessment; (3) publish 

improper payment estimates; (4) publish corrective action 

plans to reduce improper payments; (5) publish improper 

payment reduction targets, demonstrate improvements, 

and develop a plan to meet reduction targets; and 

(6) report improper payment rates of less than 10 percent. 

Why This Is a Challenge

The Department must ensure that the billions of dollars 

entrusted to it reach the intended recipients. In FY 2020, 

the Pell and the Direct Loan programs continued to be 

susceptible to significant improper payments. In FY 2020, 

the Department also identified the EIA, Restart, and 

Emergency Assistance to Institutions of Higher Education 

programs as susceptible to improper payments because 

each of the programs met OMB criteria as disaster-related 

programs with $10 million or more in outlays in a given 

fiscal year. We found that the Department’s estimates for 

all five programs that required an estimate in FY 2020 

were unreliable. It is important for the Department to 

develop statistically valid and reliable estimates so that it 

can identify the root causes and take actions to prevent 

and reduce improper payments.
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Audits and Inspections Involving Improper Payments

The OIG’s review of the Department’s compliance with improper payment reporting requirements for FY 2020 found that 

the Department did not comply with PIIA because it did not meet two of the six compliance requirements. Specifically, the 

Department did not demonstrate improvement in reducing improper payments in the Direct Loan program. In addition, 

the Department reported improper payment rates that exceed 10 percent for the EIA and Restart programs. As shown in 

Table 12, our recent improper payment audits identified opportunities for improvement in multiple areas.

Table 12

Results of Recent OIG Statutorily Required Improper Payment Audits

FY of Department’s 

Reporting

Complied with 

Reporting 

Requirements

Identified Concerns

2020 No The Department published improper payment estimates for all five required programs. 

However, its estimates were unreliable because they were not statistically valid. We found 

that the development of these estimates included the use of nonrandom samples, unsuitable 

sample weighting, or inaccurate and incomplete population sampling frames. 

We also found that the Department’s improper payment risk assessment process needs 

strengthening. Specifically, the risk assessment performed for one program did not 

adequately support the Department’s conclusion regarding its level of improper payment risk 

and the risk assessment the Department conducted on its contracts management activity 

was incomplete. 

2019 Yes The Department published improper payment estimates for the Pell, Direct Loan, EIA, 

Restart, and Emergency Assistance to Institutions of Higher Education programs as required 

by IPERA. However, we found that the published estimates for three of these programs were 

unreliable because the methodologies used to develop them were not statistically valid.

2018 Yes The Department reported inaccurate and incomplete information regarding the amounts 

of identified and recaptured improper payments in its FY 2018 Agency Financial Report. 

As a result, we could not accurately evaluate the Department’s performance in recapturing 

improper payments for its programs and activities.

Other audit work has identified potential improper payments in the student financial assistance programs and by SEAs and 

LEAs. Our semiannual reports to Congress from April 1, 2018, through March 31, 2021, included more than $20 million 

in questioned costs from audit activity and more than $81 million in restitution payments ordered from investigative activity. These examples demonstrate that there may be other potential opportunities for the Department to identify and prevent 

improper payments.

Ongoing and Planned Work

Planned projects include our annual review of the Department’s compliance with the improper payment reporting 

requirements and its efforts to prevent and reduce improper payments. We will also complete the required risk assessment 

of the Department’s purchase card program and, if deemed necessary, conduct an audit of Department purchase card 

transactions. Our planned activities for FY 2022 include multiple projects involving grant recipients where improper 

payments could be identified.

Progress in Meeting the Challenge

The Department stated that it continued to prioritize efforts to ensure payment integrity and minimize improper 

and unknown payments across all programs in FY 2021. The Department noted that collaboration between financial 

management and grants administration staff facilitated its implementation of PIIA compliance activities. According to 

the Department, increased sophistication in estimation, detection, and data collection activities helped it to expeditiously 

identify and resolve improper payments. 
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The Department identified numerous activities in response 

to this challenge that included improvements relating to 

its improper payment estimate for the EIA program. The 

Department further noted that it implemented enhanced 

quality control procedures over FSA’s improper payment 

estimation process to ensure the completeness and 

accuracy of data and calculations used in the estimates. 

The Department also stated that it developed improper 

payment training for staff and refined its Payment 

Integrity Monitoring Application, a digital tool used to 

detect anomalies in grants payment data. 

What the Department Needs to Do 

As the Department continues to work to improve its 

payment integrity initiatives, it is important that the 

Department ensures that its estimation methodologies 

for the programs deemed susceptible to significant 

improper payments produce statistically valid improper 

payment estimates. In addition, the Department needs 

to properly implement its enhanced quality control 

procedures over its improper payment estimation process. 

The OIG has not assessed the Department’s FY 2021 

estimation methodologies or the accuracy and validity 

of the Department’s estimates. The OIG will review 

the accuracy and validity of these measurements as part 

of the FY 2021 PIIA audit. This is an annual focus of 

the OIG’s work, and we will continue to monitor and 

report on the Department’s progress on this Management 

Challenge Area.

MANAGEMENT CHALLENGE 5—

INFORMATION TECHNOLOGY SECURITY

The Department’s systems house millions of sensitive 

records on students, their parents, and others, and are 

used to process billions of dollars in education funding. 

These systems are primarily operated and maintained by 

contractors and are accessed by thousands of authorized 

people (including Department employees, contractor 

employees, and other third parties such as school 

financial aid administrators). As shown in Figure 14, as of 

September 30, 2021, the Department reported more than 

$1 billion in total information technology (IT) spending 

for FY 2021. 

Figure 14

Department Total IT Spending FY 2019–2021 

(Dollars in Millions) 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Department of Education IT Agency Summary, ITDashboard.gov, as of 

September 30, 2021.

Through the Office of the Chief Information Officer 

(OCIO), the Department monitors and evaluates the 

contractor-provided IT services through a service-level 

agreement framework and develops and maintains 

common business solutions required by multiple 

program offices. OCIO is responsible for implementing 

the operating principles established by legislation and 

regulation, establishing a management framework to 

improve the planning and control of IT investments, and 

leading change to improve the efficiency and effectiveness 

of the Department’s operations. In addition to OCIO, 

FSA has its own chief information officer, whose 

primary responsibility is to promote the effective use of 

technology to achieve FSA’s strategic objectives through 

sound technology planning and investments, integrated 

technology architectures and standards, effective systems 

development, and production support.

The Federal Information Security Modernization Act of 

2014 (FISMA) requires the OIG to assess the effectiveness 

of the agency’s information security program. FISMA 

mandates that this evaluation includes (1) testing 

of the effectiveness of information security policies, 

procedures, and practices of a representative subset of 

the agency’s information systems and (2) an assessment 

of the effectiveness of the information security policies, 

procedures, and practices of the agency. 

Why This Is a Challenge

In light of increased occurrences of high-profile data 

breaches (public and private sector), the importance 
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of safeguarding the Department’s information and information systems cannot be understated. Protecting this complex 

IT infrastructure from constantly evolving cyber threats is an enormous responsibility and challenge. Without adequate 

management, operational, and technical security controls, the Department’s systems and information are vulnerable to 

attacks. Unauthorized access could result in lost data confidentiality and integrity, limited system availability, and reduced 

system reliability. For the last several years, IT security audits and financial statement audits have identified security controls 

that need improvement to adequately protect the Department’s systems and data. 

Audits Involving IT Security

Our recent reports on the Department’s compliance with FISMA, performed by the OIG with contractor assistance, noted 

that the Department and FSA made progress in strengthening their information security programs. However, as shown 

in Table 13, our recent FISMA audits included audit findings across all five cybersecurity framework security functions 

developed by the Council of the Inspectors General on Integrity and Efficiency, OMB, and the Department of Homeland 

Security and within each security function’s related metric domains. Our FY 2018 through FY 2020 FISMA audits 

concluded that the Department and FSA were not effective in any of the five security functions (Identify, Protect, Detect, 

Respond, and Recover) and we had findings in all eight metric domains.

Table 13

results of OiG fisMa audits—cybersecurity framework security functions and Metric Domains 

with audit findings

FY

Identify:

Risk 

Management

Protect: 

Configuration

Management

Protect:

Identity 

and Access 

Management

Protect:

Data 

Protection 

and Privacy

Protect:

Security 

Training

Detect:

Information 

Security 

Continuous 

Monitoring

Respond:

Incident 

Response

Recover:

Contingency 

Planning

2020 audit finding audit finding audit finding audit finding audit finding audit finding audit finding audit finding

2019 audit finding audit finding audit finding audit finding audit finding audit finding audit finding audit finding

2018 audit finding audit finding audit finding audit finding audit finding audit finding audit finding audit finding

Each of our recent FISMA reports recommended ways the Department and FSA could increase the effectiveness of their 

information security program so that they fully comply with all applicable requirements. Our FY 2020 FISMA audit 

specifically noted that the Department and FSA could strengthen their controls in several areas, examples of which are 

identified in Table 14. 

Table 14

results of the OiG’s fY 2020 fisMa audit—examples of areas where controls can be strengthened

Metric Domain Areas Where Controls can be Strengthened

risk Management • remediation process for plan of action and Milestones.

• it inventory reporting.

• required it security clauses for contracts.

Configuration 

Management

• Use of unsecure connections and appropriate application connection protocols.

• reliance on unsupported operating systems, databases, and applications in its production environments.

identify and access 

Management

• removing access of terminated users to the Department’s network and database management.

incident response • timely reporting of incidents.

• ensuring data loss prevention tools work accordingly.
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We noted that until the Department improves in these 

areas, it cannot ensure that its overall information security 

program adequately protects its systems and resources 

from compromise and loss. We made recommendations 

to help the Department and FSA fully comply with all 

applicable requirements.

Recent audits of the Department’s financial statements, 

performed by an independent public accountant 

with OIG oversight, have repeatedly identified IT 

controls as a significant deficiency. In its FY 2020 

report, the independent public accountant noted that 

the Department and FSA management demonstrated 

progress implementing corrective actions to remediate 

some prior-year deficiencies. However, they reported 

that management had not fully remediated prior-year 

deficiencies in areas such as logical access administration, 

separated or transferred user access removal, user 

access reviews and recertification, and configuration 

management. In addition, control deficiencies were 

reported for FY 2020 covering security management, 

segregation of IT duties, application change control, 

and logical access. As a result, the independent public 

accountant also reported that entity level controls were 

not designed and implemented appropriately to remediate 

identified internal control deficiencies in a timely manner. 

The independent public accountant concluded that 

ineffective IT controls increase the risk of unauthorized 

use, disclosure, disruption, modification, or destruction of 

information and information systems that could impact 

the integrity and reliability of information processed in the 

associated applications. 

Our investigative work in this area identified a fraud 

scheme targeting borrowers of Federal student financial 

assistance funds. The participants in this scheme feigned 

associated with the Department and, without authority to 

do so, guaranteed the borrowers enrollment in programs 

that would lower their monthly payments and result in 

loan forgiveness. The participants obtained and used 

borrowers’ personal identifying information to access 

and make changes to their FSA accounts without their 

consent. The impacted borrowers paid—or were scheduled 

to pay—upfront fees and additional monthly fees to the 

participants for services that Federal loan servicers provide 

at no cost. We also found that most borrowers believed 

that their payments to the participants would be applied 

toward their student loan debt, but they were not. This 

caused many of the borrowers to stop making monthly 

payments on their student loans, which resulted in late 

payment notifications, increased loan balances, and 

sometimes, defaulting on their student loans.

Planned projects in this area will determine whether the 

Department’s and FSA’s overall IT security programs and 

practices were generally effective as they relate to Federal 

information security requirements.

Progress in Meeting the Challenge

The Department identified numerous advancements in 

its IT security program in response to this challenge. 

The Department stated that it took a comprehensive 

approach to addressing this area and cited improvements 

in areas that included its technological capabilities and 

internal controls.

With respect to its technological capabilities the 

Department noted activities that included a major 

infrastructure upgrade that enhanced the security posture 

of its hosting environments. The Department also stated 

that took steps to improve its email security, expanded its 

Virtual Private Network capacity to effectively support its 

remote workforce during the pandemic, and delivered an 

alternative multi-factor authentication solution to provide 

continuity of critical business functions.

Regarding internal controls, the Department stated 

that it enhanced quality control standard operating 

procedures and checklists to ensure security incidents 

are consistently reported within required timeframes, 

consistently categorized, and include correct elements. The 

Department also noted that it worked to ensure its security 

assessment activities continue to align with Department 

of Homeland Security standards and conducted proactive 

outreach to employees regarding increased phishing and 

other cybercriminal scams.

The Department cited additional improvements that 

included establishing an Information Communications 

Technology Supply Chain Risk Management program, 

a Zero Trust strategic implementation plan, and 

Vulnerability Disclosure Policy that provides an open 

channel and legal safe harbor to engage external partners 

in discovering and reporting vulnerabilities.

What the Department Needs to Do

Managing IT security programs and practices to effectively 

reduce risk to the Department’s operations is a clear and 

ongoing management challenge. The Department relies 

on IT to manage its core business operations and deliver 
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OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

products and services to its many stakeholders. The OIG 

has consistently reported concerns regarding the overall 

effectiveness of the Department’s IT security program 

through our annual FISMA audits, financial statement 

audits, and management challenges reports. 

While we commend the Department for its efforts to 

address weaknesses and improve its IT security program, 

we continue to identify significant weaknesses in our 

annual FISMA audits—despite the Department’s reported 

corrective actions to address our prior recommendations. 

It is critical that the Department focus on the timely 

and successful implementation of corrective actions in 

response to our audit work. The Department also needs 

to continue its efforts to develop and implement an 

effective system of IT security controls, particularly in 

the areas of configuration management, identity and 

access management, data protection and privacy, and 

incident response.

The Fiscal Year 2021 Inspector General metrics include a 

new Supply Chain Risk Management domain within the 

Identify function area. However, since the new domain 

references Supply Chain Risk Management criteria in 

the National Institute of Standards and Technology 

Special Publication 800-53, revision 5, to provide 

agencies with sufficient time to fully implement it, the 

new metric was not considered for the purposes of the 

Identify framework function rating and was included for 

informational purposes only. However, past audit work 

identified deficiencies in this security area, and it presents 

a significant challenge to the Department as they address 

critical weaknesses.

Our FISMA audits will continue to assess the 

Department’s efforts within this area, and IT security 

will remain a management challenge until our work 

corroborates that the Department’s system of controls 

achieves expected outcomes. To that end, the Department 

needs to effectively address deficiencies, continue to 

provide mitigating controls for vulnerabilities, and 

implement planned actions to correct weaknesses.
134 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | OFFIcE OF INspEcTOR GENERAl’s MANAGEMENT cHAllENGEs FOR FY 2022

400 MARYLAND AVE., S.W., WASHINGTON, DC 20202 

www.ed.gov

The Department of Education's mission is to promote student achievement and preparation for global competitiveness by 

fostering educational excellence and ensuring equal access. 

DEpARTMENT cOMMENTs

UNITED STATES DEPARTMENT OF EDUCATION 

OFFICE OF FINANCE AND OPERATIONS

November 2, 2021

TO: Sandra D. Bruce

Acting Inspector General

U.S. Department of Education

FROM: Denise L. Carter

Acting Assistant Secretary

Office of Finance and Operations

SUBJECT: Response to Office of Inspector General Draft Report, “U.S. Department of Education

FY 2022 Management Challenges”

Thank you for the opportunity to provide input on the Office of Inspector General (OIG) draft report,

U.S. Department of Education (Department) Fiscal Year (FY) 2022 Management Challenges.

The Department values the OIG’s perspective on risks and vulnerabilitiesrelated to programs and

operations. Similar to last year’s report, the inclusion of five challenges in areas of Implementing Pandemic

Relief Laws; Oversight and Monitoring; Data Quality and Reporting; Improper Payments; and Information

Technology Security are well-aligned with the Department’s own assessment of enterprise risks and 

respective targeted management efforts.

The Department continues to navigate the challenges of serving the public through a pandemic, and we are

pleased to reportseveralsignificantstepsto addressthe identified challenges. This memo contains a 

summary of the Department’s progress in meeting each of the five challenges, organized by challenge title.

Attached, you will find a supplemental document that provides proposed technical corrections to other

sections of the draft report.

We look forward to continued communication and collaboration on these issues.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 135

OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

CHALLENGE 1: IMPLEMENTING PA N D E M I C 

RELIEF LAWS

New Grant Programs and Additional Federal 

Education Funds; Data Quality

Congress passed multiple COVID-19 relief bills in FY 

2020 and FY 2021 (i.e., the Coronavirus Aid, Relief, and 

Economic Security Act of 2020, the Coronavirus Response 

and Relief Supplemental Appropriations Act of 2021, and 

the American Rescue Plan Act of 2021 that provided a total 

of $282.3 billion in education- related assistance to prevent, 

prepare for, and respond to the COVID-19 emergency. 

The Department took comprehensive steps to ensure 

appropriate interpretation of the legislations’ requirements 

and subsequent policy and operational implications.

The Office of Finance and Operations and the Office 

of Planning, Evaluation, and Policy Development 

coordinated Department efforts to successfully award an 

extraordinary number and size of COVID-19 relief awards 

on expedited grantmaking timelines on top of the ongoing 

administration of the agency’s $70+ billion annual 

portfolio of existing programs. Additional collaborations 

with Congressional Appropriations Committee staff 

and the Office of Management and Budget (OMB) 

helped ensure statutory requirements and program 

implementation priorities were met. The Department also 

participated in several accountability engagements with the 

OIG and the Government Accountability Office regarding 

the implementation of the pandemic relief laws, the 

programs that manage and execute the requirements, and 

the overall stewardship of the appropriations.

To address the additional administrative, monitoring, 

and oversight workload associated with administering the 

pandemic relief funding, the Department strategically 

leveraged the COVID-19 excepted service hiring 

authority, per the Office of Personnel Management, to 

augment staffing resources for the Office of Postsecondary 

Education and the Office of Elementary and 

Secondary Education.

To ensure effective and timely support to eligible 

applicants, grantees, and stakeholders while also 

balancing the need for high quality data collection and 

reporting processes, the Department implemented several 

strategies including:

• Establishing structured processes for data collection 

and reporting;

• Implementing preventative funds control measures for 

accurate tracking and reporting of funds in real time;

• Adopting risk-based approaches to administering 

program funding and comprehensive monitoring;

• Providing regulatory flexibilities, training, written 

guidance, webinars, direct technical assistance to 

new grantees;

• Reducing burdensome data collections, thorough 

progress reviews, and clear and transparent reporting 

(via the Education Stabilization Fund (ESF) 

Transparency Portal launched in November 2020). 

The Public Transparency Portal allows the Department 

to track performance, hold grantees accountable, and 

provide transparency to taxpayers and oversight bodies;

• Issuing early and comprehensive communications 

to grantees outlining clear data quality and timing 

expectations; and

• Working with OMB to ensure relevant programs were 

included in the 2021 Compliance Supplement, which 

issues guidance relied upon by independent third-party 

auditors who review or audit federal programs and 

negotiate “high-risk” designations for these programs.

Lessons learned from the initial ESF grantee data collection 

experience significantly informed the processes for the year 

two annual collection. Through these collections, the 

Department will be better able to assess the use of funds, 

providing visibility into the equitable recovery of schools 

and students as well as the capacity to promote learning.

Student Financial Assistance Program 

Requirements; Data Quality

The COVID-19 relief legislation and administrative 

actions also provided support for student loan borrowers 

primarily by suspending nearly all federal loan payments 

until January 31, 2022, interest free. The Department 

also stopped all federal wage garnishments and collection 

actions, as well as interest accrual, for borrowers with 

federally held loans in default.

DEPARTMENT COMMENTS
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In addition to COVID-19 relief, the Department 

provided targeted relief to thousands of borrowers by 

cancelling $11.5 billion of loans using authority previously 

authorized by Congress. The targeted beneficiaries include 

those who were:

• Qualified for total and permanent disability discharge.

• Defrauded by failed for-profit schools.

• Deployed to war zones (soldiers).

• Denied eligibility previously for forgiveness under the 

Public Service Loan Forgiveness Program.

The Department automatically placed all borrowers in 

administrative forbearance status, which allowed them to 

temporarily stop making monthly loan payments. Once 

the payment suspension period ends on January 31, 2022, 

all non-defaulted borrowers in the federal student loan 

portfolio will be in a current repayment status. Federal 

Student Aid (FSA) closely tracks data related to repayments 

to identify the impact of borrowers’ decisions regarding 

repayment to understand current revenue and cost to 

the federal government. FSA refunded more than 99% of 

involuntary payments made by borrowers with defaulted 

loans who were subject to having certain Treasury 

payments offset or wages garnished. Additionally, FSA 

worked with loan servicers to ensure all eligible borrowers 

received personalized communications informing them of 

the changes.

CHALLENGE 2: OVERSIGHT AND M O N I TO R I N G

Student Financial Assistance Programs

FSA improved oversight and monitoring of institutions 

of higher education (IHEs) participating in Title IV 

programs. In doing so, FSA worked to address weaknesses 

in the single audit process to improve its use as an oversight 

and monitoring tool for IHEs’ disbursements of Pell 

Grants and Direct Loans. They additionally deployed an 

analytical model to continually monitor partner data and 

performance, thus improving the ability to identify IHEs 

most at-risk and allow more effective use of oversight 

resources by informing and prioritizing support for IHEs.

Over the next several years, the Department will 

implement additional risk-based procedures to evaluate an 

accrediting agency’s ability to effectively determine and 

measure IHE compliance with accreditation standards and 

to identify accrediting agencies at higher risk of failing to 

meet statutory and regulatory requirements and additional 

procedures to prioritize oversight of those higherrisk agencies.

FSA implemented an improved model for verification 

selection and evaluation of data elements from the FAFSA 

that allows the Department to better identify applicants 

for whom errors will result in a change in their federal aid 

award, potentially reducing improper payments.

The President signed the Fostering Undergraduate Talent 

by Unlocking Resources for Education (FUTURE) 

Act in December 2019, which will help ensure the 

accuracy of income information used for determining 

Pell Grant eligibility. One of the primary causes of 

improper payments in the Pell Grant program is failure 

to accurately verify financial data. The FUTURE Act 

provides an exception to the Department of Education 

from restrictions of Section 6103 of the Internal Revenue 

Code to allow the Department to receive income tax data 

more easily from the Internal Revenue Service (IRS). 

Implementation of the FUTURE Act began in FY 2020 

and will continue through FY 2023. FSA has organized 

implementation into three phases:

1. Establishing FSA’s ability to request and receive 

certain Federal Tax Information from the Internal 

Revenue Service through the FUTURE Act Direct 

Data Exchange;

2. Updating FSA systems and processes to enable the 

provisions of the FUTURE Act; and,

3. Working with FSA’s partners—schools, state agencies, 

and designated scholarship organizations—as they 

update their systems and processes to fully implement 

the FUTURE Act.

Grantee Oversight

The Department continued to prioritize enhancing 

processes related to grant oversight and monitoring 

to achieve positive program outcomes. Recent 

innovative initiatives, process overhauls, and technology 

improvements further strengthened and modernized 

the grants administration process. During FY 2021, the 

Department continued to expand these efforts with a 

DEPARTMENT COMMENTS
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critical emphasis on capacity building of and collaboration 

across grants staff to boost oversight and monitoring 

practices and effective stewardship of taxpayer funded 

investments. Several strategic efforts facilitated the swift 

response to the COVID-19 pandemic and associated 

administration of relief funding:

• Assessing the standard grantmaking process to identify 

opportunities to create operating efficiencies and 

increase program effectiveness through cross-POC 

coordination and information sharing;

• Establishing new virtual monitoring and support 

approaches for discretionary and formula 

grant programs;

• Developing and implementing comprehensive in-house 

training resources;

• Enhancing pre-award risk assessments by adding 

contextual information on individual grantees relative 

to parent institutions;

• Implementing a grants management acquisition 

program that includes post-award monitoring support;

• Leveraging contract support to increase online training 

resources for grantees, including key areas of risk such 

as Subrecipient Monitoring;

• Ensuring data systems effectively collect grantee data, 

analyze performance, detect risk, report progress, and 

serve as a catalyst for continuous improvement to all 

aspects of grant operations and program monitoring;

• Awarding a contract for the G5 Modernization 

Initiative to develop a modern, modular, secure, and 

user-friendly G5 grants management system to support 

the range of stakeholder needs throughout the grant 

lifecycle; and,

• Partnering with the Department of Health and 

Human Services to pilot emerging solutions that could 

further strengthen and streamline future risk-based 

monitoring strategies.

C H A L L E N G E 3: D ATA Q U A L I T Y A N D 

REPORTING

The Department is committed to improving access, use, 

and dissemination of meaningful education data while 

protecting privacy. Doing so enables the Department to 

provide education stakeholders with timely and accurate 

information to inform decisions.

In FY 2021, the Department took numerous steps 

to address this challenge and emphasize a strong 

commitment to protecting student’s education data both 

within the agency and at educational institutions by:

• Establishing a holistic agencywide framework that 

formalized data management functions through new 

Data Governance Policies to support data maturation 

across the Department (Data Governance Board);

• Implementing annual Data Maturity Assessments to 

evaluate office data strategies, data quality assessments, 

and data cleansing to help determine growth and gaps, 

identify priority areas for improvement, and drive 

relevant budgetary decisions and investments that 

support overall data management capabilities;

• Developing a Data Quality Playbook which 

outlined authorities, tools, and resources for grant 

program managers;

• Developing a comprehensive data workforce plan to 

better align the workforce with functional data needs;

• Implementing process improvements related to program 

performance and accountability measures;

• Collaborating with the IRS to implement 

programmatic changes to ensure accuracy of income 

data used for determining Pell Grant eligibility (see 

Challenge #2, above).

• Engaging with nearly 1,000 schools to build capacity to 

improve security of student financial and privacy data;

• Conducting more than 20 outreach activities in response 

to breach incidents, to improve compliance with 

cybersecurity safeguards; and,

DEPARTMENT COMMENTS
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• Conducting outreach to more than 500 IHEs in 

response to Microsoft Exchange Vulnerability to ensure 

awareness of the vulnerability and provide guidance for 

remediation or management of potential exposure.

Apart from FSA, the National Center for Education 

Statistics (NCES) operates the largest data collections 

within the agency and continues to focus on models for 

data quality improvement to support Department- wide 

program data collections. EDFacts, which contains both 

the statistical Common Core of Data release and data 

required for multiple ED programs, sought to improve the 

completeness and accuracy of data as well as the timeliness 

of submissions by K-12 state education agencies. Select FY 

2021 accomplishments include the refinement of NCES 

data collection guidance to establish reasonable due dates 

and timelines for state grantees and the publication of a 

Business Rules Single Inventory (available to all grantees 

and regularly reviewed by NCES staff).

The inception of ED’s OIG Management Challenges 

report in 2008 identified data quality as a significant 

challenge area, and it has remained one ever since. 

In August of 2021, the Department released its first 

Annual Evaluation Plan for FY 2022, as required by The 

Evidence Act, to delineate these activities. In addition to 

the continued deployment of the above initiatives, other 

foci for FY 2022 include updating the Department’s 

Information Quality Act Guidelines and the establishment 

of data quality plans.

CHALLENGE 4: IMPROPER PAY M E N T S

The Department continued to prioritize efforts to ensure 

payment integrity and minimize improper and unknown 

payments across all programs in FY 2021, including 

monitoring disaster-related programs in accordance with 

OMB Memorandum M-18-14. Collaborations between 

financial management and grants administration staff 

aimed to facilitate successful implementation of Payment 

Integrity Information Act compliance activities (e.g., 

improper payment estimations, as well as qualitative 

and quantitative improper payment risk assessments for 

programs and activities in scope). Increased sophistication 

in estimation, detection, and data collection activities 

helped expeditiously identify and resolve improper 

payments. Improvement action items included:

• Updating the methodology for the Emergency Impact 

Aid program and implementing written procedures 

regarding the processes of obtaining and validating 

population data including quality assurance steps to 

ensure the results of the test sample are calculated 

correctly to yield a reliable improper payment estimate;

• Establishing a process to introduce subject matter expert 

(SME) reviews of improper payment cases to make final 

determination when they cannot be resolved by the 

program offices;

• Developing and delivering improper payment training 

for staff;

• Refining the Payment Integrity Monitoring

Application, a digital tool to detect anomalies in grants

payment data (i.e., case management files for payment 

anomalies are established within the application for 

follow-up investigation by the Department’s grants 

program officials to validate improper payments and

determine root causes);

• Implementing enhanced quality control procedures 

over FSA’s improper payment estimation process to

ensure the completeness and accuracy of compliance

audit data and calculations used inthe estimates; and,

• Coordinating with OMB and the independent audit 

community to recommend and advocate for changes to 

the OMB Compliance Supplement to strengthen the 

quality of data used in improper payment estimates.

CHALLENGE 5: INFORMATION TECHNOLOGY 

SECURITY

FY 2021 advancements in the information technology 

security program encompass both technological 

capabilities as well as improvements in knowledge 

management and internal controls. The Department took 

a comprehensive approach to addressing this management 

challenge including:

• Establishing an Information Communications 

Technology (ICT) Supply Chain Risk Management 

(SCRM) program;

DEPARTMENT COMMENTS
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OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

• Releasing a strategic roadmap designed to provide a 

vision and action plan for the planning, preparation, 

implementation, and execution of ED’s ICT 

SCRM Program;

• Establishing a Zero Trust strategic implementation 

plan, addressing current issues with access, including 

unauthorized, and siloed single point solutions for 

data protection;

• Publishing a Vulnerability Disclosure Policy that 

provides an open channel and legal safe harbor 

to engage external partners in discovering and 

reporting vulnerabilities;

• Completing a major infrastructure upgrade to 

improve performance, dependability, capacity, and 

security to enhance the security posture of our 

hosting environments;

• Enhancing quality control standard operating 

procedures and checklists to ensure incidents are 

consistently submitted to United States Computer 

Emergency Readiness Team and the OIG within the 

required timeframes, and are consistently categorized, 

and include the correct vector elements as required;

• Deploying and monitoring the Office 365 email 

Data Loss Prevention (DLP) capability to bolster the 

Department’s email security;

• Ensuring the Department’s security assessment 

activities continue to align with DHS standards;

• Mitigating operational impacts of the COVID-19 

pandemic through delivery of Personal Identity 

Verification authentication as alternative multi-factor 

authentication solution providing continuity of critical 

business functions;

• Identified, analyzed, and recommended cloudbased solutions to provide rapid expansion of the 

Department’s Virtual Private Network capacity to 

effectively support our remote workforce during the 

pandemic; and,

• Conducting proactive outreach to employees regarding 

increased phishing and other cybercriminal scams 

yielding a 7% average reporting rate increase this year.

DEPARTMENT COMMENTS
140 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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 auditors’ report can be found beginning on page 98 and the Department’s management 

assurances on page 23.

SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion: Unmodified 

Restatement: No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 1 0 0 0 1

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 of 1996 (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. U.S. Standard General Ledger at Transaction Level No lack of compliance noted No lack of compliance noted
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 141

Payment Integrity Information Act Reporting

All program outlays can be categorized into one of three 

payment type categories: proper payments, improper 

payments, and unknown payments. OMB Circular 

A-123, Appendix C, Requirements for Payment Integrity 

Improvement, defines an improper payment as a payment 

that was made in an incorrect amount under statutory, 

contractual, administrative, or other legally applicable 

requirements. The term improper payment includes any 

payment to an ineligible recipient; any payment for an 

ineligible good or service; any duplicate payment; any 

payment for a good or service not received, except for 

those payments where authorized by law; any payment 

that is not authorized by law; and any payment that does 

not account for credit for applicable discounts. OMB 

Circular A-123, Appendix C, also defines an unknown 

payment as a payment that could either be proper or 

improper, but it cannot be determined whether the 

payment was proper or improper because of insufficient or 

lack of documentation.

The Department places a high value on maintaining the 

integrity of all types of payments made to ensure that the 

billions of dollars in federal funds it disburses annually 

reach intended recipients in the right amount and for 

the right purpose. The Department ensures payment 

integrity by establishing effective policies, business 

processes, systems, and controls over key payment 

activities, including those pertaining to payment data 

quality, cash management, banking information, thirdparty oversight, assessments of audit reports, and financial 

reporting. The number and dollar value of improper 

and unknown payments are key indicators of payment 

integrity. Accordingly, the Department maintains a robust 

internal control framework that includes internal controls 

designed to help prevent, detect, and recover improper 

and unknown payments. In designing controls, the 

Department attempts to strike the right balance between 

making timely and accurate payments and ensuring 

that controls put in place are not too costly or overly 

burdensome and thereby deter intended beneficiaries from 

obtaining funds they are entitled to receive. Additionally, 

the Department must rely heavily on controls established 

by external entities that receive Department payments, 

including federal, state, and private organizations and 

institutions, because they further distribute funds they 

receive from the Department to subordinate organizations 

and individuals. Due to these third-party controls being 

outside of the Department’s operational management, 

they present a higher risk to the Department, as evidenced 

by its root cause analysis. When control deficiencies are 

detected, either within the Department or at external 

entities, the Department seeks to identify their root causes, 

develop corrective action plans, and track corrective 

actions through to completion.

To further promote payment integrity, the Department 

continues to develop its Payment Integrity Monitoring 

Application (PIMA), which detects anomalies in grants 

payment data. Case management files for payment anomalies are established within the application for follow-up 

investigation by the Department’s grants program officials 

to validate improper payments and determine root causes. 

Additionally, the Department continues to develop its 

internal control framework to address gaps, strengthen 

internal control processes, and align assessments with 

enterprise risk management. Both efforts reflect the 

Department’s recognition of the critical importance that 

payment integrity plays in demonstrating financial stewardship to the American taxpayer.

D E S C R I P T I O N O F R I S K- S U S C E P T I B L E A N D 

H I G H - P R I O R I T Y P R O G R A M S 

In FY 2021, the Federal Pell Grant and William D. Ford 

Federal Direct Loan programs continued to be susceptible 

to significant improper payments and remained OMBdesignated high-high priority programs. Also, in FY 2021, 

the Department continued monitoring outlays of grant 

programs receiving funding for disaster relief. According 

to OMB Memorandum M-18-14, Implementation of 

Internal Controls and Grant Expenditures for the DisasterRelated Appropriations, any disaster-related program with 

$10 million or more in outlays in a given fiscal year is 

deemed susceptible to significant improper payments. 

The Department identified three programs that met 

this criterion: the Temporary Emergency Impact Aid 

for Displaced Students (Emergency Impact Aid), 

Immediate Aid to Restart School Operations (Restart) 

and the Emergency Assistance to Institutions of Higher 

Education (EAI) program. Additionally, at the conclusion 
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OTHER INFORMATION | PAYMENT INTEGRITY INFORMATION ACT REPORTING

of FY 2020’s improper payment risk assessment, the 

Department identified the Title I, Part A (Title I) as being 

susceptible to significant improper payments. 

The Department continues to place additional emphasis 

to ensure payment integrity and minimize improper 

and unknown payments in these important programs as 

required by OMB guidance. Readers can obtain a detailed 

breakdown of information on improper and unknown 

payment estimates, root causes, and corrective actions for 

the programs at https://paymentaccuracy.gov.

P E L L G R A N T 

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 post-baccalaureate students to promote access to 

postsecondary education. 

D I R EC T LO A N 

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.

T E M P O R A RY E M E R G E N CY I M PAC T A I D 

FOR DISPLACED STUDENTS

The Temporary Emergency Impact Aid for Displaced 

Students (Emergency Impact Aid) program awards 

emergency impact aid funding to state educational 

agencies (SEA). SEAs provide subgrants to local 

educational agencies (LEA) to reimburse the costs of 

educating students enrolled in public schools (both 

traditional and charter) and nonpublic elementary and 

secondary schools, who were displaced by a covered 

disaster or emergency.

I M M E D I AT E A I D TO R E S TA R T 

S C H O O L O P E R AT I O N S 

The Immediate Aid to Restart School Operations (Restart) 

program awards grants to eligible SEAs to assist eligible 

LEAs and nonpublic schools with expenses related to the 

restart of elementary schools and secondary schools in 

areas impacted by a covered disaster or emergency. Funds 

may be used to assist school administrators and personnel 

in restarting school operations, reopening schools, and 

reenrolling students.

EMERGENCY ASSISTANCE TO INSTITUTIONS OF 

HIGHER EDUCATION

The Emergency Assistance to Institutions of Higher 

Education (EAI) program awards grants for emergency 

assistance to eligible Institutions of Higher Education 

(IHE) for which a major disaster or emergency has been 

declared. Funds awarded assist activities directly related to 

mitigating the effects of a covered disaster or emergency 

on students and institutions. To the extent possible, EAI 

prioritizes projects that support students who are homeless 

or who are at risk of becoming homeless as a result of 

displacement related to a covered disaster or emergency; 

and IHEs that have sustained extensive damage by a 

covered disaster or emergency. 

TITLE I, PART A

Title I, Part A (Title I) of the Elementary and Secondary 

Education Act, as amended by the Every Student Succeeds 

Act (ESEA) provides financial assistance to LEAs and 

schools with high numbers or high percentages of children 

from low-income families to help ensure that all children 

meet challenging state academic standards. Federal funds 

are currently allocated through four statutory formulas 

that are based primarily on census poverty estimates and 

the cost of education in each state.

In FY 2021, the Department used statistically valid 

sampling and estimation methodologies to estimate the 

improper payment rates for the Pell Grant, Direct Loan, 

Emergency Impact Aid, Restart, EAI and Title I programs. 

The methodologies used for each of these programs 

are described in detail on the Department’s improper 

payments website.

For detailed information on Pell Grant, Direct Loan, 

Emergency Impact Aid, Restart, EAI, and Title I improper 

payment estimates in FY 2021 and prior years, please visit 

https://paymentaccuracy.gov.

AC T I O N S TA K E N TO A D D R E S S AU D I TO R 

RECOVERY RECOMMENDATIONS

Agencies are required to conduct recovery audits for all 

programs and activities that expend more than $1 million 

in a fiscal year, if conducting such audits would be costeffective. The Department determined that payment 

recapture audits would not be cost effective for any of its 

loan and grant programs or for contracts. A comprehensive 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 143

PAYMENT INTEGRITY INFORMATION ACT REPORTING | OTHER INFORMATION

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 and 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. The Department 

also analyzes the return of grant funds from recipients to 

determine if they are due to improper payments. When 

an improper payment is detected and deemed collectable, 

the Department establishes an account receivable and 

pursues collection. Recoveries are also made through 

grant program, payroll, and other offsets. Recipients of 

Department funds can appeal management’s decisions 

regarding funds to be returned to the Department 

or they may go bankrupt before the Department can 

collect, thereby delaying or decreasing the amounts 

the Department is able to collect. Additionally, the 

Department has wide discretion to decide not to collect 

improper payments from grantees in cases where it 

determines that pursuing collections would cause more 

harm to the federal interest. For these and other reasons, 

not all identified improper payments will ultimately be 

collected and collections will not necessarily be made in 

the same year the improper payments were identified. 

The Department continues to work to improve its 

methods to identify, collect, and report on improper 

payment collections. For detailed information on 

identified and recovered improper payments in FY 2021, 

readers can visit https://paymentaccuracy.gov.
144 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, 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.

Location for Penalty Update Details:

https://www.federalregister.gov/documents/2021/02/03/2021-02231/adjustment-of-civil-monetary-penalties-for-inflation

Table 15

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) 1-14-20 2-03-21 $ 39,693

Failure to provide information regarding teacherpreparation programs20 USC 

1022d(a)(3) 1-14-20 2-03-21 33,062

Violation of Title IV of the HEA 20 USC 1082(g) 1-14-20 2-03-21 59,017

Violation of Title IV of the HEA 20 USC 

1094(c)(3)(B) 1-14-20 2-03-21 59,017

Failure to disclose information to minor children and parents 20 USC 

1228c(c)(2)(E) 1-14-20 2-03-21 1,742

Improper lobbying for government grants and contracts

31 USC 

1352(c)(1) and 

c(2)(A)

1-14-20 2-03-21

20,731

 to

207,314

False claims and statements 31 USC 3802(a)(1) 

and (a)(2) 1-14-20 2-03-21 11,803

Civil Monetary Penalty Adjustment for Inflation
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 145

The goal of the Grants Oversight and New Efficiency (GONE) Act of 2016 (Pub. L. No. 114-117) was to close out grants 

and cooperative agreements that are in manual closeout with zero dollars and undisbursed balances and whose period of 

performance has exceeded two years. Although the Grants Oversight and New Efficiency Act reporting requirements have 

expired, the Office of Management Circular A-136, Section II.4.9, Grants Programs (August 10, 2021) requires similar 

information to be reported in the Other Information section. See Table 16 below.

Starting with an October 3, 2016, baseline of 8,948 grants and cooperative agreements totaling approximately $2 billion 

in various statuses of the closeout process, the Department succeeded in closing out 100 percent of the required grants 

and cooperative agreements during FY 2018. As of September 30, 2021, the Department had 165 grants and cooperative 

agreements totaling approximately $59.7 million in various statuses of the closeout process. See Table 16 below.

In FY 2020, the Department’s Office of Inspector General (OIG) performed a risk assessment of the Department’s grant closeout 

process and issued their results via memorandum. They identified risks with the reliability of grant data and related GONE 

Act reporting, as well as the Department’s grant closeout policies and procedures, including a policy allowing older grants to be 

closed in compliance without required reports being provided by the grantee. In addition, the OIG found that both the volume 

of expired grants and amount of undisbursed grant funds significantly increased between the date of initial GONE Act reporting 

(September 30, 2017) and January 30, 2020, indicating that grant closeout is less of a focus now that GONE Act reporting is 

over. The memorandum is available at https://www2.ed.gov/about/offices/list/oig/auditreports/fy2020/s19u0002.pdf.

Overall, the Office of Finance and Operations (OFO) agreed with the OIG assessment and noted its intention to move 

forward with grant policy deliberation consistent with the results of the assessment. Approved in July 2020, the Handbook 

for the Discretionary Grants Process (Handbook) includes policy requiring program officials to provide to the Deputy 

Assistant Secretary of the Office of Acquisition and Grants Administration (OAGA) a report on the status of Federal grants 

or cooperative agreements in the Department’s grant management system, G5, that have been in manual closeout status for 

two years or more. The report will include a narrative of the challenges leading to delays in grant and cooperative agreement 

award closeout and the planned corrective action to address these challenges. OAGA is now receiving reports from the 

program officials and will monitor progress on the proposed corrective actions.

During the summer of 2020, OAGA offered a financial monitoring curriculum for formula and discretionary grants aligned 

with the Standards for Financial Management in 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit 

Requirements for Federal Awards, addressing cash management and drawdown activity of grantees’ utilization of funds consistent 

with an approved scope of work aimed at reducing issues associated with grant closeouts. The content of the sessions included 

the Handbook policy referencing grants and cooperative agreements in manual closeout status for two years or more and the 

submission of reporting with corrective actions to the Deputy Assistant Secretary of OAGA.

Table 16

Category 2–3 Years FY 2018–19 3–5 Years Years FY 2017–18 > 5 Years before FY 2016

Number of Grants/Cooperative 

Agreements with Zero 

Dollar Balances

53 2 -

Number of Grants/Cooperative 

Agreements with Undisbursed 

Dollar Balances

110 - -

Total Amount of 

Undisbursed Balances $59,675,808 - -

Source: G5, grants management system linked to the Department’s general ledger system. Data is based on the performance end date of September 30, 2019.

The Grants Oversight and New Efficiency 

(Gone) Act of 2016 and Education’s Grant 

Closeout Process 
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