FY 2022 AGENCY FINANCIAL REPORT 121 U.S. DEPARTMENT OF EDUCATION

OTHER

INFORMATION

(UNAUDITED)
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OTHER INFORMATION (UNAUDITED)

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FY 2022 AGENCY FINANCIAL REPORT 123 U.S. DEPARTMENT OF EDUCATION

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About the Other Information Section

The Other Information section includes:

OFFICE OF INSPECTOR GENER AL’S 

(OIG) MANAGEMENT AND 

PERFORMANCE CHALLENGES FOR 

FISCAL YEAR 2023

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 2023. The OIG identified the following five challenges: 

(1) Implementing Pandemic Relief Laws, (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.

SUMMARY OF FINANCIAL STATEMENT 

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.

PAYMENT INTEGRITY INFORMATION 

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.

CIVIL MONETARY PENALT Y 

ADJUSTMENT 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.

CLIMATE ADAPTATION PLAN

This section summarizes the Department’s FY 2021 

Climate Adaptation Plan.

THE GR ANTS OVERSIGHT AND NEW 

EFFICIENCY ACT OF 2016 (GONE 

ACT) AND EDUCATION’S GR ANT 

CLOSEOUT PROCESS

This section provides a high-level summary of the 

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

cooperative agreements.
FY 2022 AGENCY FINANCIAL REPORT 124 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF INSPECTOR GENERAL

THE INSPECTOR GENERA

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

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

December 13, 2022

TO: The Honorable Miguel Cardona

Secretary of Education

FROM: Sandra D. Bruce

Inspector General

SUBJECT: Management Challenges for Fiscal Year 2023 

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 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 

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

considers the accomplishments reported by the Department. 

Our FY 2023 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 2022 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 2023 management challenges in the coming

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

245-6900. 
FY 2022 AGENCY FINANCIAL REPORT 125 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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 (IHE) 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 Act (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. 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 that now surpasses 

$1.6 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 (ESF) 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 

(HEER)

$76.2 

billion

HEER funds are awarded to IHEs. HEER 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 EANS funds are awarded to Governors, who are responsible for complying with grantee 

oversight requirements, but SEAs are responsible for administering the program. 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 essential for carrying out emergency educational services, providing childcare 

and early childhood education, social and emotional support, and protecting educationrelated jobs. GEER funds can be used to support these entities’ ongoing operations and 

efforts to provide educational services to students.

Office of Inspector General’s (OIG) Management and Performance 

Challenges for Fiscal Year 2023
FY 2022 AGENCY FINANCIAL REPORT 126 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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. 

While the pandemic relief laws provided more 

than $161 million to the Department for student 

aid administration and $38 million for program 

administration, 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. 

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 

remain significant challenges 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 continue 

to 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) 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 continues to implement 

and oversee the student aid provisions in the CARES Act, 

resumes collections on Federal student loans in 2023, and 

implements plans to provide up to $20,000 in debt relief 

to eligible borrowers. 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.
FY 2022 AGENCY FINANCIAL REPORT 127 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Table 5

OIG’s Recent Reports Relating to Pandemic Relief Laws

Activities Reviewed Review Results

GEER We issued three audits from a series of work on States’ administration of GEER fund grants. 

We found that one State designed awarding processes that would ensure GEER funds supported entities that were most 

significantly impacted by the coronavirus. However, we also found that the State did not always implement the awarding 

process as it was designed and could strengthen its monitoring process over entities’ use of the GEER grant.

We found that another State did not award all GEER grant funds to entities in accordance with the CARES Act, Federal 

regulations, and grant conditions. We also found that the State should strengthen its monitoring process and did not 

comply with the GEER grant award Federal cash management terms and conditions. Additionally, our work identified more 

than $650,000 in purchases that did not appear to be education-related.

We found that an additional State did not maintain sufficient documentation to support its processes for awarding GEER 

funds to eligible entities. We also found that the State did not have a written plan to monitor its GEER grant subgrantees. 

HEER We have issued five reports relating to HEER funds.

We issued a flash report that identified $73 million in duplicate HEER grant awards made by the Department. We found 

that the Department’s processes did not always prevent or timely identify and correct duplicate HEER grant awards, and 

that the Department did not consistently document activities taken to correct duplicate awards.

In our work related to the Department’s oversight of HEER fund grants, we found that the Office of Postsecondary 

Education (OPE) did not perform or document several key activities that are essential to effective program oversight. 

This included developing a framework to guide its monitoring practices, procedures, and controls and designing and 

implementing a risk-based monitoring plan to provide assurance that HEER grant funds are used appropriately and 

performance goals are being met. We also found that OPE did not establish performance goals for the HEER fund program 

or specific metrics that would provide a basis to monitor individual schools’ performance or report on outcomes at the 

program level.

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

generally used the Student Aid portion of their HEER 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 HEER funds nor deposit excess funds in an interest-bearing 

account, contrary to Federal regulations.

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

to HEER 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 HEER 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.

Flexibilities We found improvements were needed in Federal Student Aid’s (FSA) implementation of Teacher Education Assistance 

for College and Higher Education (TEACH) Grant CARES Act flexibilities. We found weaknesses in FSA’s processes that 

may have resulted in inappropriate denials of CARES Act flexibilities to some eligible recipients and may have provided 

benefits to recipients who were not entitled to them. We also found weaknesses in processes associated with a contract 

modification that may have impacted FSA’s assurance that the contractor properly approved or rejected certifications of 

recipients impacted by COVID-19. 

Student Financial 

Assistance Program 

Requirements

We found that 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 FSA 

suspended administrative wage garnishments and 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 ESF reporting in the Federal Audit Clearinghouse regarding the inconsistent reporting of 

subprogram expenditures by grantees and subgrantees. This included instances where grantees and subgrantees did not 

identify subprograms or used variations of subprogram identifying information. 

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

sample complied with HEER 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 HEER funds also reviewed the timeliness and quality of the data that two 

schools reported on their use of HEER funds. We found that the information in both schools’ required HEER reports were 

generally accurate, complete, and timely.
FY 2022 AGENCY FINANCIAL REPORT 128 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Activities Reviewed Review Results

Department Operations Our assessment of the Department’s reconstitution plans following COVID-19 found that 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.

The OIG recent investigative activity within this area is shown in Table 6. 

Investigations of Pandemic Relief Funding 

Table 6

OIG’s Recent Investigative Activity Relating to Pandemic Relief Funding

Area Example of Related Investigative Activity

Institutions OIG investigations have identified institutions that drew down funds when not entitled to them, drew down 

funds when knowingly closing, or drew down funds with no intent to provide them to students. 

Program Participants OIG investigations have identified students stealing the identity of others to fraudulently obtain 

HEER funds. 

OIG investigations have identified schemes associated with the HEER program where individuals target 

institutional accounts containing HEER funds or other individuals submitted applications in mass to 

multiple institutions to obtain funds.

Employees OIG investigations have identified employees applying for non-ED pandemic related funds such as 

Paycheck Protection Program (PPP) for which they were not entitled to.

Ongoing and Planned Work

Our ongoing work in this area includes reviews of two 

States’ oversight and use of ESSER funds; LEAs’ use 

of ESSER funds for technology; a third school’s use of 

HEER funds; FSA’s use of pandemic assistance program 

administration funds; and FSA’s processes for the return of 

Title IV of the Higher Education Act of 1965, as amended 

(Title IV) requirements, cancellation of borrower loans, and 

exclusion Pell lifetime usage.

Our planned projects relating to State and local programs 

within this area for fiscal year (FY) 2023 include reviews 

of additional States’ oversight and use of ESSER funds, the 

Department’s oversight of ESSER funds, the Department’s 

oversight of HEER funds to replace lost revenue, and States’ 

administration and oversight of EANS grant funds. 

Our planned project relating to student financial assistance 

and higher education programs within this area for 

FY 2023 include a review of FSA’s transition of Federal 

student loan borrowers back into repayment after the relief 

measures implemented in response to the pandemic expire.

Progress in Meeting the Challenge 

The Department stated that it took steps to ensure 

appropriate interpretation of the legislative requirements in 

multiple pandemic relief laws. This included collaboration 

with Congressional Appropriations Committee staff and 

the Office of Management and Budget to help ensure 

that statutory requirements and program implementation 

priorities were met. The Department added that multiple 

offices coordinated to expedite the award of pandemic relief 

grants while administering its portfolio of existing programs 

and responding to accountability engagements of the 

Government Accountability Office and the OIG.

The Department stated that it leveraged pandemic hiring 

authorities to help address its increased administrative and 

oversight responsibilities. This included specific activities to 

support monitoring efforts related to the HEER, ESSER, 

GEER, and EANS programs. The Department added that 

it implemented multiple strategies to provide support and 

help ensure the quality of data collected. According to the 

Department, this included providing technical assistance, 

using risk-based monitoring approaches, ensuring 
FY 2022 AGENCY FINANCIAL REPORT 129 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

relevant programs were included in guidance for nonFederal auditors, coordinating with the OIG, establishing 

processes for regular communication with grantees, and 

implementing structured data collection processes, with 

changes this year having been significantly informed 

by lessons learned from the initial ESF grantee data 

collection experience. 

The Department added that it took steps to implement 

pandemic relief requirements related to the student 

financial assistance programs. This included suspending 

payments and interest accrual on Federal student loans, 

stopping wage garnishments for borrowers in default, and 

ensuring that flexibilities were applied to eligible TEACH 

Grant recipients. The Department also stated that it is 

making preparations to return all borrowers to a repayment 

status when the payment pause ends. According to the 

Department, its plan includes borrower outreach, servicer 

hiring, training and preparation, policy enhancements, and 

vendor and process oversight.

What the Department Needs to Do 

The Department identified several actions it had taken to 

address the challenges posed by the pandemic relief laws. Its 

activities to provide guidance and assistance to recipients, 

implement certain requirements, and expand its oversight 

capabilities are generally responsive to this challenge. 

However, our work continues to identify weaknesses in 

areas that include recipients’ program administration, 

the Department’s programmatic oversight, and related 

data quality and reporting. Overall, the Department 

should continue its efforts, improve its implementation of 

controls to better ensure effective monitoring and oversight 

processes, and use the information it receives to identify 

and address risks as they emerge. It is also important that 

the Department implement activities in ways that allow 

it to assess their impact and whether they contribute to 

improved outcomes that demonstrate progress toward 

addressing this challenge. 

Specifically, the Department should continue to employ 

strategies that effectively support its program staff and 

grantees. It should also assess the results of its monitoring 

efforts and other information collected from recipients 

to identify areas that could benefit from additional 

guidance or technical assistance. The Department should 

also continuously evaluate its oversight activities and 

refine them as necessary to enhance their effectiveness. 

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 it or others, 

including Federal and non-Federal auditors. Continuing 

to use a lessons-learned approach, like the one cited above 

on changes to its 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, 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. 
FY 2022 AGENCY FINANCIAL REPORT 130 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

MANAGEMENT CHALLENGE 2—

OVERSIGHT AND MONITORING

Effective oversight and monitoring of the Department’s 

programs and operations are critical to ensure that 

funds are used for the purposes intended and programs 

are achieving goals and objectives. This is a significant 

responsibility for the Department given the numbers of 

different entities and programs requiring monitoring and 

oversight, the amount of funding that flows through the 

Department, and the impact that ineffective monitoring 

could have on 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 access Federal financial aid 

so they can gain the benefits of education and training 

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. 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 more than $1.6 trillion, 

representing about 216.9 million student loans to more 

than 43 million borrowers. FSA oversees the disbursement 

of more than $27 billion in grants to more than 6 million 

recipients.11 FSA also oversees approximately 5,600 

postsecondary institutions that participate in the Federal 

student aid programs. 

In FY 2021, FSA performed these functions with 

an administrative budget of $1.9 billion and about 

1,400 employees, along with contractors that provide 

outsourced business operations. From FY 2017 to FY 2021, 

FSA delivered an average of $118.9 billion in Federal 

student aid to an average of 11.4 million students.

11 Information relating to the amount of the loan portfolio, number of loans and 

borrowers, amount of grants, and number of recipients are from the Federal 

Student Aid Annual Report FY 2021.

Figure 14

Student Aid Delivered and Postsecondary Students Receiving Aid FYs 2017–2021

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

 

Total Federal Student

Aid Delivered (in

billions of $)

$122.5 $122.4 $121.8 $115.6 $112.0

 

Total Postsecondary

Students Receiving

Aid (in millions)

12.9 12.7 10.4 10.8 10.1

Source: Federal Student Aid Annual Report FY 2021 
FY 2022 AGENCY FINANCIAL REPORT 131 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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 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 postsecondary institutions, contracted servicers, 

collection agencies, accrediting agencies, guaranty agencies, 

and lenders. 

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 7.

Table 7

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.

Heightened Cash 

Management

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

the top five reasons FSA placed a school on heightened cash monitoring. 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 (HEA) of 1965, as amended.

In our second audit in this area, we found that a school improperly applied professional judgment across three classes of 

students and based on wedding expenses or standard living expenses rather than applying professional judgment on a 

case-by-case basis for special circumstances, as required by the HEA. The school also did not adequately document special 

circumstances for 57 percent of the students for whom it applied professional judgment for one or both award years covered 

by our audit.

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 a non-profit company and the 13 for-profit postsecondary schools that it 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. Additionally, 

the Department 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. 
FY 2022 AGENCY FINANCIAL REPORT 132 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Activities Reviewed Review Results

Total and Permanent 

Disability (TPD) 

Discharges

We found that FSA appropriately approved and rejected TPD applications and that 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 four 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 separate 

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.

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 8.

Table 8

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

Area Example of Related Investigative Activity

Institutions An OIG investigation identified instances where a school concealed making payments on students’ loans to prevent defaulting on 

their loans and being counted against the school’s cohort default rate.

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

school applicants, students, and donors into believing it was a top-ranked program.

Program 

Participants

OIG investigations identified schemes where a student underreported income and assets to obtain student financial assistance they 

were not eligible to receive; a man targeted veterans and student loan borrowers and offered to help them obtain discharges for 

Federal student loans in exchange for a fee; and a woman deceived borrowers into believing they qualified for student loan relief 

and charged fees to facilitate their loan discharge process.

Distance 

Education Fraud 

Rings

Distance education 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 

an additional school’s use of professional judgment, 

FSA’s transition to the Next Generation Loan 

Servicing Environment, the Department’s process for 

terminating private collection agency contracts, three 

schools’ compliance with career pathways and ability 

to benefit provisions, and reviews of FSA’s processes for 

overseeing proprietary school compliance with 90/10 

revenue requirements. 

Additional planned projects for FY 2023 include FSA 

oversight of career pathway programs, FSA oversight of 

its contractor’s acceptability review process for proprietary 

school annual audits, FSA’s borrower defense to repayment 

loan discharge process, FSA’s Student Aid and Borrower 

Eligibility Reform Initiative, and FSA’s transition plans and 

oversight of Business Process Operations. 

Progress in Meeting the Challenge

The Department stated that FSA established an 

Enforcement Office in October 2021 to strengthen its 

oversight of postsecondary schools participating in the 

Title IV programs. According to the Department, the 

Enforcement Office will proactively identify and address 

substantial misrepresentations and other misconduct by 

schools. The Department further stated that in FY 2023 

the Enforcement Office plans to use a risk model to focus 
FY 2022 AGENCY FINANCIAL REPORT 133 U.S. DEPARTMENT OF EDUCATION

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resources on schools that pose the highest risk to students, 

their families, and taxpayers. 

The Department identified several other efforts undertaken 

by FSA that were intended to improve oversight and 

monitoring activities relating to the student financial 

assistance programs, including 

• working to improve the usefulness of single audits as an 

oversight and monitoring tool;

• employing an analytical model to identify at-risk schools 

and prioritize its oversight resources to provide support 

to schools; 

• proposing regulations relating to change of school 

ownership approvals that could limit potentially harmful 

agreements; 

• implementing the Fostering Undergraduate Talent by 

Unlocking Resources for Education Act, which will allow 

FSA to receive income tax data more easily from the 

Internal Revenue Service. The Department stated that 

this data will help strengthen the oversight of participants 

in the student financial assistance programs by ensuring 

the accuracy of income information used to determine 

student aid eligibility and monthly payment amounts;

• continuing use of a model for verification selection that 

reduces the number of filers selected without sacrificing 

the overall degree of confidence; 

• using a data match with the Social Security 

Administration to automatically discharge student 

loans for certain individuals that qualify for total and 

permanent disability relief;

• planning a long-term servicing strategy (Unified 

Servicing and Data Solution) that is intended to 

improve borrower experiences and increase servicer 

accountability; and

• working to raise public awareness of consumer scams 

through communications via social media, direct emails, 

and its website.

What the Department Needs to Do

The Department continued to report progress in improving 

its oversight and monitoring of student financial assistance 

programs. It specifically identified actions that were 

responsive to the subject areas of several recent OIG 

reports. This included activities intended to improve 

its processes relating to verification of FAFSA data, 

TPD discharges, and changes in postsecondary school 

ownership. While there has been progress, it is critical that 

the Department continue its improvement efforts. This 

includes effectively designing and implementing systems 

of internal controls and developing processes that allow an 

assessment of their effectiveness and their contributions 

towards the achievement of established goals. Further, it 

is important that the Department develop measures to 

evaluate its progress and demonstrate the impact of its 

initiatives relating to this challenge. 

We continue to recognize that the Next Gen initiative 

has significant potential to improve FSA’s ability to 

oversee contractors that service Federal student aid. It 

remains 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. 

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 a wide range of eligible recipients, 

including LEAs, SEAs, IHEs, individuals, nonprofits, 

and other organizations, and monitoring their progress in 

meeting program objectives. The Department also ensures 

that programs are administered fairly and that grants are 

executed in conformance with both authorizing statutes 

and laws prohibiting discrimination in Federally funded 

activities, collects data and conducts research on education, 

and helps 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 administers more than 100 grant 

programs that annually serve about 56 million elementary 

and secondary students attending 98,000 public schools 

and 32,000 private schools, as well as about 9 million 

postsecondary students attending 5,600 colleges and 

universities. Many of these programs also serve other types 

of students, extending from early learning through adult 

education. The Department awards discretionary grants 

using competitive processes and priorities, and formula 

grants using formulas established by Congress. In all cases, 
FY 2022 AGENCY FINANCIAL REPORT 134 U.S. DEPARTMENT OF EDUCATION

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the Department’s activities are governed by the program 

authorizing legislation and implementing regulations. 

One of the key programs that the Department administers 

is Title I, Part A, which provided about $17.5 billion in 

FY 2022 for local programs that provide extra academic 

support to help an estimated 25 million students in highpoverty schools meet State academic standards. Another key 

program is Individuals with Disabilities Education Act, Part 

B Grants to States, which provided more than $13.3 billion 

in FY 2022 to help States and school districts meet the 

special educational needs of an estimated 7.4 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.

Audits Relating to Federal Education Grant Programs 

Our recent audits at the grantee level 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 9.

Table 9

OIG’s Recent Reports Relating to Grantee Implementation of Federal Education Grant Programs

Activities Reviewed Review Results

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

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 eleven 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 three 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 another entity failing to obtain 

control and ownership of materials, funded by the Restart program, at nonpublic schools. 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. We found that the third SEA appropriately allocated program funds but could 

improve its processes for ensuring that LEAs use program funds for allowable and intended purposes by better adhering to its 

established procedures for reimbursement of expenditures.

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

four 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 three SEAs did not ensure that LEAs used EIA program funds to pay salaries only 

for employees who supported schools with displaced students. Our most recent report in this area found that an SEA received 

an estimated $6.5 million more in EIA program funds than it should have received because it incorrectly interpreted the Federal 

definition of a displaced student and lacked effective written procedures and system controls to ensure that accurate student 

enrollment and withdrawal data were entered in its student information system. We found that another SEA expensed more 

than $300,000 in EIA program funds for employees who worked at schools that did not support displaced students because it 

did not monitor LEAs’ EIA program expenditures.

We issued a Flash Report on the risk of an SEA’s unallowable use of EIA program 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.

In our most recent work in this area, we found that a postsecondary school used approximately $1.8 million in Emergency 

Assistance to Institutions of Higher Education program funds for lost tuition revenue and to purchase certain equipment that 

was not allowable in accordance with Federal requirements. 
FY 2022 AGENCY FINANCIAL REPORT 135 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Activities Reviewed Review Results

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.

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 10, our work included audits within several areas.

Table 10

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

Area Reviewed Review Results

Charter Schools We found that the Department did not track and report on whether charter schools that grant recipients opened and expanded 

with Federal funds remained open after the grant performance period ended. We also found that grant recipients did not 

always open or expand the number of charter schools committed to in their approved grant applications.

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 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 has provided inadequate oversight of grantee performance and funds awarded under the 

Student Support and Academic Enrichment program. Specifically, we found that the Department has conducted only limited 

formal monitoring activities; has not ensured that SEAs are meeting all reporting requirements; and did not always develop, 

finalize, and implement monitoring plans to monitor grantees’ performance and use of funds. As a result, the Department has 

little assurance that grantees are making progress toward program goals and objectives and limited insight regarding how 

grantees and subgrantees are using, or potentially misusing, grant funds.

Our work on State plans required under the Every Student Succeeds Act 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.
FY 2022 AGENCY FINANCIAL REPORT 136 U.S. DEPARTMENT OF EDUCATION

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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 11.

Table 11

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 they did not perform, fraudulently obtained 

contracts, committed bribery, and made kickback payments.

SEA Officials An OIG investigation identified an SEA official receiving financial benefits in exchange for leasing school space to a 

private company.

LEA Officials OIG investigations identified instances where officials fraudulently enrolled private school students in virtual public schools and 

then falsely reported those students to the SEA.

Another OIG investigation identified instances where LEA employees submitted false timecards for work not performed on 

Federally funded programs.

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 an SEA’s 

use of Restart program funds, the Department’s oversight 

of Charter School Program Grants for Replication 

and Expansion of High-Quality Charter Schools, 

reviews of selected SEAs’ implementation of their 

Statewide accountability systems, and the Department’s 

implementation of its rule concerning equity in the 

Individuals with Disabilities Education Act. 

Planned projects for FY 2023 include the Department’s 

oversight of the State Vocational Rehabilitation Services 

program, the Department’s approval of alternative 

assessment waivers, and selected SEAs’ oversight of 

spending and educational outcomes of Prevention and 

Intervention Programs for Children and Youth Who Are 

Neglected, Delinquent, or At Risk. 

Progress in Meeting the Challenge

The Department stated that it continues to employ a 

progressive improvement approach to addressing the 

longstanding management challenge on oversight and 

monitoring of grant recipients. The Department added 

that in FY 2022 this included focusing on the consistent 

application of risk-based and data-driven monitoring 

approaches to improve recipient and grant program 

outcomes. According to the Department, it implemented 

several initiatives to further these goals, to include

• implementing a grant monitoring solution (Virtual 

Monitoring Principles), intended to increase the 

efficiency, collaboration, and consistency of risk-based 

monitoring and technical assistance protocols across 

Department offices;

• providing technical assistance to Department offices 

that focused on grantee and subrecipient responsibilities, 

adhering to internal controls, subrecipient monitoring, 

data quality, and reporting;

• facilitating information sharing through monthly 

and quarterly grant policy forums on oversight and 

monitoring practices, solutions, and resources;

• continually assessing the grant-making process to 

identify improvement opportunities using data 

and collaboration;

• utilizing Grantee Satisfaction Survey results to inform 

improvements in the areas of technical assistance and 

grant performance reporting across program offices; and

• coordinating the oversight and monitoring of pandemic 

relief programs to ensure that funds were used for 

the purposes intended and that goals and objectives 

are achieved.

What the Department Needs to Do

The Department continues to report progress in enhancing 

its grantee oversight processes. The Department identified 

several actions it had taken to address this challenge, 

including a focus on risk-based monitoring approaches to 

improve outcomes. While this, and several other actions 
FY 2022 AGENCY FINANCIAL REPORT 137 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

it identified, are responsive to this challenge, it remains 

critical that the Department develop and implement 

processes that allow it to assess the outcomes of these 

actions. This includes establishing measures against which 

it can assess the impact of its various initiatives and identify 

additional opportunities for improvement.

Given our ongoing findings under this challenge area, 

the Department should continue its efforts to implement 

innovative approaches to grantee oversight, offer common 

training to program staff, encourage collaboration and 

communication within and across program offices, and take 

steps to ensure that its technical assistance and monitoring 

activities are both risk-based and data-driven. The Department 

should especially focus on the actions taken by pass-through 

entities to provide oversight of their subrecipients. Importantly, 

concerning its actions in this area. 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.

MANAGEMENT CHALLENGE 3 — DATA 

QUALITY AND REPORTING 

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 5,600 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. 

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 12.

Table 12

OIG’s Recent Data Quality Related Reports

Area Reviewed Review Results

Charter Schools We issued a report on the effectiveness of Charter School Programs in increasing the number of charter schools. We found 

that the Charter School Program office’s processes did not result in grant recipients reporting clear, reliable, and timely 

information. Their processes also did not result in the Charter School Program office receiving all the information needed to 

assess grant recipients’ performance or evaluate the overall effectiveness of the Charter School Program.

We have issued two audit reports relating to Charter School Program Grants for the Replication and Expansion of High-Quality 

Charter Schools. We found that both grant recipients did not include complete and accurate information for all performance 

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

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

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

Clery Act crime statistics. We concluded that both schools’ 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.

Digital Accountability 

and Transparency 

(DATA) Act

An independent public accountant, with OIG oversight, determined that the Department submitted data of excellent quality 

based on guidance provided by the Council of Inspectors General on Integrity and Efficiency. It also determined that the 

Department implemented and used the Government-wide financial data standards established under the DATA Act. However, 

it found that Department did not submit certain data completely, accurately, or timely, and identified internal control deficiencies 

over the Department’s DATA Act submissions.
FY 2022 AGENCY FINANCIAL REPORT 138 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Area Reviewed Review Results

Disaster Recovery We found that four 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, students withdrew from the school prior to the disaster 

or enrolled after the reporting date, and displaced student counts were not supported by adequate documentation.

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 HEER 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 FSA’s processes for 

schools to report the return of Title IV waivers, the 

Department’s reporting on experimental sites initiatives, 

and a school’s use of professional judgment. 

Progress in Meeting the Challenge

The Department stated that it identified the root causes 

for persistent data quality challenges in FY 2020 and 

concentrated its data quality efforts to collections associated 

with the ESF in the wake of the pandemic. According 

to the Department, it expanded a support contract to 

supplement existing staff resources and expertise. The 

Department added that this allowed for the development 

system architecture to identify potential data quality issues, 

many of which required resolution prior to acceptance 

of reports.

The Department stated that it provided several resources 

to support ESF grantees in response to these challenges. 

According to the Department, this included technical 

assistance (such as live and recorded webinars), business 

rule guides, and an ESF Reporting Help Desk. The 

Department stated that it also provided ESF grantees with 

clear expectations for reporting quality data in its ESF 

Year 2 Annual Performance Reports by communicating 

minimum data quality expectations for performance 

reporting and potential consequences for failure to report. 

The Department stated that its actions contributed to 

improved reporting compliance, and that it continued to 

review and address data quality issues across all collections. 

The Department provided examples of actions taken in 

FY 2022, including one Department office that applied 

special payment conditions to 40 noncompliant recipients. 

The Department also stated that another of its offices had 

just three grantees that had not submitted Year 2 reports. 

The Department further stated that multiple Departmentwide initiatives were completed, continued, initiated, or 

planned during FY 2022, including

• creating a performance metric focused on tracking 

instances where data collections lack data quality 

plans and working to update Information Quality 

Act Guidelines;

• completing a Data Quality Playbook that provides easily 

deployable strategies for program offices, especially their 

grant staff; 

• initiating development of data quality training tailored 

to different audiences;

• continuing to modernize the EDFacts system and 

implement data quality checks; and

• developing tools such as a data quality dashboard, data 

catalog, and query management resources.

What the Department Needs to Do

The Department continued to report progress in addressing 

this challenge through its actions to improve the quality 

of education data. This included activities relating to 

pandemic relief programs and other Department-wide 

initiatives. While the Department completed multiple 

actions to advance data quality, several of our recent reports 

included findings within this area. As with the preceding 

challenges, it is important that the Department continue to 

build upon its improvement efforts. It is also critical that it 

develop processes to assess the effectiveness of these efforts. 

This includes implementing methods to assess the impact 

of its data quality initiatives against established goals and 

considering any lessons learned to refine existing processes 

or establish new ones.
FY 2022 AGENCY FINANCIAL REPORT 139 U.S. DEPARTMENT OF EDUCATION

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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) 

repealed and replaced several improper payments statutes, 

including the Improper Payments Elimination and 

Recovery Act of 2010 (IPERA) and consolidated those 

laws’ requirements. 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 is 

required to post those estimates to PaymentAccuracy.gov. 

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 2021, the Pell and the William D. Ford Federal 

Direct Loan (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. For FY 2021, we found that the Department 

published unreliable improper payment estimates for 

the Title I, Part A; Pell; and Direct Loan programs. It is 

important for the Department to develop reliable estimates 

so that it can identify the root causes and take actions to 

prevent and reduce improper payments.

Audits and Inspections Involving Improper Payments

The OIG’s review of the Department’s compliance with 

improper payment reporting requirements for FY 2021 

found that the Department did not comply with PIIA 

because it did not meet one of the six compliance 

requirements. Specifically, the Department reported an 

improper payment estimate for the Title I, Part A program 

that exceeded 10 percent. As shown in Table 13, our recent 

improper payment audits identified opportunities for 

improvement in multiple areas.
FY 2022 AGENCY FINANCIAL REPORT 140 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Table 13

Results of Recent OIG Statutorily Required Improper Payment Audits

FY of Department’s 

Reporting

Complied with 

Reporting 

Requirements Identified Concerns

2021 No The Department published unreliable improper payment estimates for the Title I, Part A; Pell; 

and Direct Loan programs. We found that the Department’s improper payment sampling and 

estimation plan for the Title I, Part A program was not adequate for SEAs that use certain 

advance payment processes. We also found that the Department’s sampling and estimation 

plans for the Pell and Direct Loan programs were unreliable. 

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. 

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. 

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 2022, 

including programs considered “susceptible to significant 

improper payments” per OMB guidance. The Department 

specifically identified several activities that were intended 

to facilitate successful implementation of Payment Integrity 

Information Act of 2019 compliance activities including

• revising the sampling and estimation methodology 

and plan for the Title I, Part A program to address 

the root cause of reported improper payments and 

to ensure SEAs would be able to obtain supporting 

documentation from LEAs for sampled transactions;

• continuing to promote improper payment awareness and 

deliver payment integrity training for Department staff;

• continuing to employ the Payment Integrity Monitoring 

Application as a means of detecting anomalies in grants 

payment data; and

• continuing efforts to obtain OMB’s approval of the 

sampling and estimation plans for the Pell Grant and 

Direct Loan programs.

What the Department Needs to Do 

As the Department continues to work to improve 

its payment integrity initiatives, it is important that 

it ensures that its estimation methodologies for the 

programs deemed susceptible to significant improper 

payments produce reliable 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 2022 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 2022 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.
FY 2022 AGENCY FINANCIAL REPORT 141 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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). According to information 

on ITDashboard.gov, the Department expects to spend 

more than $1 billion in information technology (IT) for 

FY 2023. 

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. 

For FY 2022 FISMA reporting, we evaluated the 

Department’s security program using the 20 core Inspector 

General Reporting Metrics that were published for FY 2022 

and issued by OMB. The OIG’s assessment for FY 2022 

showed improvements but was significantly different from 

the FY 2021’s audit. The 20 core metrics evaluated for 

FY 2022 represented less than one third of the 66 metrics 

used to assess the Department’s effectiveness for FY 2021. 

Why This Is a Challenge

Considering increased occurrences of high-profile data 

breaches (public and private sector), the importance 

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 and 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 and Inspections 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 14, our recent 

FISMA audits and inspection included 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 2019 through FY 2021 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 for FYs 2019 through 2020, and 

all nine (supply chain risk management was added during 

FY 2021) for FY 2021. However, in FY 2022, based on the 

new metric scoring, the Department and FSA were found 

to be effective in four of the five security functions (Protect, 

Detect, Respond, and Recover), having findings in four of 

the nine metric domains.
FY 2022 AGENCY FINANCIAL REPORT 142 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Table 14

Results of OIG FISMA Audits and Inspections—Cybersecurity Framework Security Functions and Metric Domains 

with New Findings

Domain FY 2019 FY 2020 FY 2021 FY 2022

Identify: Risk Management Audit Finding Audit Finding Audit Finding -

Identify: Supply Chain Risk Management NA NA Audit Finding -

Protect: Configuration Management Audit Finding Audit Finding Audit Finding Inspection Finding

Protect: Identity and Access Management Audit Finding Audit Finding Audit Finding Inspection Finding

Protect: Data Protection and Privacy Audit Finding Audit Finding Audit Finding Inspection Finding

Protect: Security Training Audit Finding Audit Finding Audit Finding -

Detect: Information Security 

Continuous Monitoring

Audit Finding Audit Finding Audit Finding -

Respond: Incident Response Audit Finding Audit Finding Audit Finding Inspection Finding

Recover: Contingency Planning Audit Finding Audit Finding Audit Finding -

In previous FISMA reports from FY 2019 through 

FY 2021, the OIG recommended ways the Department 

and FSA could increase the effectiveness of their 

information security program so that they could fully 

comply with all applicable requirements. In FY 2022, the 

Department and FSA improved its maturity rating for 

eight of nine metric domains. Although the Department’s 

overall information security program was assessed to be 

effective in FY 2022 based on the 20 core FISMA metrics, 

the OIG made recommendations in several areas where 

the Department and FSA could strengthen their controls. 

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. 

Although the Department’s security program was assessed 

as effective based on the 20 core Inspector General 

Reporting Metrics for FY 2022, IT security will continue to 

remain a management challenge given that this was the first 

year under the new metrics and that there are significant 

areas with remaining recommendations. In addition, we 

note that the Department’s technology environment is 

constantly evolving, bringing new threats and cybersecurity 

requirements. As technology environments evolve, it is 

important that the Department continues to ensure that it 

implements the respective security controls to protect its 

information and resources. 

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 2021 report, 

the independent public accountant noted that FSA 

management demonstrated progress in 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, new and 

existing control deficiencies were reported for FY 2021 

covering security management, access controls, segregation 

of IT duties, application change management, and 

logical access. 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 increases 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. 

Planned projects in this area will continue to 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. For 
FY 2022 AGENCY FINANCIAL REPORT 143 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

FY 2023, we have planned an inspection to determine 

whether the Department is effectively monitoring the 

oversight and approval of its IT contracts in accordance 

with applicable Federal requirements and guidelines.

Progress in Meeting the Challenge

The Department stated that its advancements in the 

IT security program encompassed both technological 

capabilities as well as improvements in knowledge 

management and internal controls. The Department 

identified several specific actions taken to help address this 

management challenge, including 

• implementing a new cybersecurity policy framework;

• implementing an ongoing security assessment and 

authorization program that is intended to result in more 

frequent system stakeholder engagement and timely 

risk visibility;

• maturing its risk management processes;

• enhancing its automated cybersecurity reporting;

• expanding the Vulnerability Disclosure Policy program 

to cover all internet accessible Department systems;

• onboarding a zero-trust architecture program manager 

and releasing a Department strategy and project 

schedule for full implementation by the end of FY 2024;

• developing analytics capability to assist FSA in 

identifying applicants that met criteria of potential fraud 

and grouping them for identity verification activities;

• completing the global password change for StudentAid.

gov;

• completing Multifactor Authentication Phase 1, making 

multifactor authentication mandatory for all new users 

on StudentAid.gov; and

• planning for completion of Multifactor Authentication 

Phase 2 in FY 2023. This is expected to provide FSA 

with the capability to enforce multifactor authentication 

enablement for existing users on a rolling basis. 

What the Department Needs to Do

The Department continued to identify actions that were 

responsive to this challenge, addressed vulnerabilities, and 

improved its IT security program. However, we continue 

to identify significant weaknesses in our annual FISMA 

reviews. Overall, the Department 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. It is critical 

that the Department continue to focus on the timely and 

successful implementation of corrective actions in response 

to our audit work. In addition, the Department needs to 

remain on the forefront of emerging information security 

strategies and solutions, such as Zero Trust12 Architecture, 

to ensure that controls are continually integrated into its 

security program.

Our FISMA and discretionary information security 

audit and inspection work 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.

12 Zero trust focuses on resource protection and the premise that trust is never 

granted implicitly but must be continually evaluated. Zero trust architecture is an 

end-to-end approach to enterprise resource and data security that encompasses 

identity (person and nonperson entities), credentials, access management, 

operations, endpoints, hosting environments, and the interconnecting 

infrastructure. The initial focus should be on restricting resources to those with a 

need to access and grant only the minimum privileges (e.g., read, write, delete) 

needed to perform the mission.
FY 2022 AGENCY FINANCIAL REPORT 144 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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
FY 2022 AGENCY FINANCIAL REPORT 145 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

CHALLENGE 1: IMPLEMENTING 

PANDEMIC 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, the Coronavirus Response 

and Relief Supplemental Appropriations Act, 2021, and 

the American Rescue Plan Act of 2021) (collectively, 

Education Stabilization Fund (ESF)) 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 (OFO) and the 

Office of Planning, Evaluation, and Policy Development 

coordinated Department efforts – and worked with the 

Office of Postsecondary Education (OPE) and the Office 

of Elementary and Secondary Education (OESE) – to 

successfully award an extraordinary number and size of 

ESF grants on expedited 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 

responded to several accountability engagements with the 

Office of Inspector General (OIG) and the Government 

Accountability Office (GAO) regarding the implementation 

of these pandemic relief laws while simultaneously 

implementing the ESF programs themselves. 

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 OPE and OESE. The additional 

staff allowed OPE to create the Emergency Response Unit, 

which enabled OPE to have dedicated staff to monitor 

and support the Higher Education Emergency Relief 

Fund (HEERF) program, and OESE’s Office of State and 

Grantee Relations to administer, monitor and support all 

the elementary and secondary ESF programs, including the 

Elementary and Secondary School Emergency Relief Fund 

(ESSER), the Governor’s Emergency Education Relief Fund 

(GEER), and the Emergency Assistance to Non-Public 

Schools (EANS). 

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, including both annual and quarterly 

reporting requirements.

• Implementing preventative funds control measures for 

accurate tracking and reporting of funds in real time.

• Adopting risk-based approaches to administering 

program funding, and targeted and comprehensive 

monitoring.

• Providing regulatory flexibilities, training, written 

guidance, webinars, and direct technical assistance to 

new grantees.

• Conducting thorough progress reviews and providing 

clear and transparent reporting (via the 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. 

• Working with OMB to ensure relevant programs were 

included in the 2020, 2021, and 2022 Compliance 

Supplements, which issues guidance relied upon 

by independent third-party auditors who review or 

audit federal programs. Beginning with the FY 2021 

supplement, the Department sought and received 

approval from OMB for a “higher risk” designation for 

ESF grant funds. 

• Creating a HEERF proprietary institution auditing 

requirement and working with OIG to develop the 

HEERF Audit Guide for proprietary schools.

• Creating a Required Proprietary Institution Certification 

form to ensure appropriate accountability regarding 
FY 2022 AGENCY FINANCIAL REPORT 146 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

proprietary institutions receiving ARP HEERF (a)(4) 

grant funding.

• Establishing procedures in OPE for quality control of 

grant obligations to institutions of higher education 

(IHEs), including application and award verification 

procedures, quality assurance reviews of obligated 

HEERF awards, and the correction and documentation 

of erroneous awards in a timely manner for potential use 

in future emergency programs.

• Taking various coordinated accountability actions 

(OPE) using enhanced processes, corrected any errors 

on expedited basis and identified compliance concerns 

when needed among 5,000+ HEERF grantees. Such 

actions include the de-obligation of funds, restricting 

access to funds, and/or requiring an IHE to return funds 

to the Department.

• Coordinating (OESE) with OIG on a monthly basis to 

address audits and investigations and ensure alignment 

to reduce burden on grantees and share information. 

• Establishing processes (weekly workgroups) (OPE and 

OESE) to respond to grantee questions with consistency 

and in accordance with regulatory and statutory 

requirements.

• Establishing (OESE) routine touch points with grantees 

via monthly check-ins and quarterly reviews.

• Continuing to provide (OPE and OESE) comprehensive 

training to ensure employees possess the knowledge, 

tools, and resources to successfully perform the tasks and 

responsibilities of the grant-making processes, which 

includes quality controls for pre- and post-obligations, 

as well as for monitoring the ESF grants.

• Conducting (OPE) a complete post-award analysis 

of all HEERF grants awarded in concert with our G5 

grant system and Budget Service and memorializing this 

process to ensure that OPE comprehensively identifies 

and corrects any errors in funding in the future. 

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

The COVID-19 relief legislation and administrative actions 

provided crucial support to student loan borrowers. Nearly 

all federal loan payments on Department-held loans were 

suspended and made interest free beginning in March 

2020, and after many extensions, through December 

31, 2022. FSA also acted quickly and effectively to stop 

all federal wage garnishments and collection, as well as 

interest accrual, for borrowers with federally held loans in 

default; FSA went even further by refunding over 99% of 

involuntary payments made during that period. FSA also 

continued to monitor the receipt of funds for an extended 

period to identify employers that did not comply with the 

Department’s instructions to stop wage garnishments and 

to issue further refunds to borrowers.

Similarly, FSA was also highly effective in ensuring 

CARES Act flexibilities were applied to eligible TEACH 

Grant recipients, and when appropriate OESE and OPE 

also applied authorized flexibilities. To further improve 

its implementation of these flexibilities, FSA increased 

communications to eligible recipients and improved 

guidance to servicers about how to implement these 

flexibilities. FSA also will continue for more than two years 

to provide direct oversight and review of TEACH Grant 

recipients who are denied these flexibilities.

On August 24, 2022, the Biden-Harris administration 

announced that the Department will implement 

historic student debt relief, which includes targeted debt 

cancellation of up to $20,000 for borrowers with certain 

federal loans earning income below specified thresholds. 

The details of this effort are complex and evolving, but the 

Department is working intensively to deliver on President 

Biden’s promise.

As the payment pause nears its end on December 31, 

2022, the Department is diligently preparing to meet the 

unprecedented challenge of returning all borrowers to a 

repayment status and helping them maintain their current 

repayment status. The goal is to achieve a smooth transition 

that minimizes the risk of borrower harm due to confusion, 

lack of awareness, or insufficient servicing capacity. 

The Department’s comprehensive plan for returning 

borrowers to repayment combines elements of borrower 

outreach; servicer hiring, training and preparation; policy 

enhancements; and vendor and process oversight.
FY 2022 AGENCY FINANCIAL REPORT 147 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

In discussing ongoing challenges, it is important to 

acknowledge that resource limitations from working 

under a long-term Continuing Resolution rather than an 

approved FY 2023 budget may impact the Department 

and FSA as they seek to implement planned initiatives and 

achieve their stated objectives.

CHALLENGE 2: OVERSIGHT 

AND MONITORING

Student Financial Assistance Programs

FSA improved its oversight and monitoring of institutions 

of higher education (IHEs) participating in Title IV 

programs. On October 8, 2021, FSA established 

the Enforcement Office to strengthen oversight of 

postsecondary schools that participate in the federal 

student loan, grant, and work-study programs. This 

includes initiating enforcement actions against schools 

as appropriate. The Enforcement Office will proactively 

identify and address substantial misrepresentations and 

other misconduct by schools that are shown to impose 

outsized costs on borrowers and taxpayers. During 

FY 2023, the Enforcement Office plans to continue 

refining and implementing the use of a risk model aimed 

at identifying schools and service providers that may 

be engaged in those costly misrepresentations or other 

misconduct. It will seek to use the model to focus its 

investigatory resources on a limited number of those 

schools deemed to pose the highest risk to students, their 

families, and taxpayers. Where warranted, the Enforcement 

Office will initiate enforcement actions, which could 

include fines, limitation actions, or termination from 

the Title IV program. Finally, the office will continue to 

administer the Borrower Defense program, through which 

borrowers who were defrauded by their schools can receive 

a discharge of their federal student loans. 

FSA has worked on addressing weaknesses in the single audit 

process to improve the single audit’s use as an oversight and 

monitoring tool for IHEs’ disbursements of Pell Grants 

and Direct Loans. On September 30, 2022, FSA submitted 

a report to OMB supporting changes in reporting under 

the single audit to improve its usefulness as an oversight 

and monitoring tool. FSA continues to use and improve 

its 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. 

On July 28, 2022, the Department issued proposed 

regulations that will require IHEs to provide information 

about a change of ownership 90 days prior to that change; 

will significantly modify the definition of a nonprofit 

institution; and strengthen FSA’s ability to place conditions 

on any approvals to limit potentially harmful agreements 

between entities or when an institution wishes to convert 

from for profit to nonprofit. FSA has also informed schools 

that it may require additional signatures on a school’s 

Program Participation Agreement when a school seeks 

initial certification or recertification or when it undergoes 

a change of ownership. This requirement will provide more 

accountability and better protect taxpayers in the event of a 

school closure, approved borrower defense claims, or when 

other liabilities are owed to the Department.

Implementation of the Fostering Undergraduate Talent by 

Unlocking Resources for Education (FUTURE) Act began 

in FY 2020 and will continue through FY 2024. This Act 

will allow FSA to receive income tax data more easily from 

the Internal Revenue Service (IRS) to administer the Free 

Application for Federal Student Aid (FAFSA®) and income 

driven repayment plans. Using the IRS tax data will help 

strengthen the oversight of participants in the Title IV 

programs by ensuring the accuracy of income information 

used to determine student aid eligibility and monthly 

payment amounts. 

To provide better borrower outcomes, improve 

cybersecurity, and address pending contract expirations, 

the Department has established a long-term servicing 

strategy named the Unified Servicing and Data Solution 

(USDS). The USDS contract award is anticipated by 

early in calendar year 2023. By leveraging multiple 

system and process improvements made since the Next 

Gen initiative launched in 2017, among other benefits, 

the implementation of USDS will improve borrower 

experiences in both interactions with servicers and 

accessing their loan information as well as increasing 

servicer accountability. 

For borrowers participating in income driven repayment 

(IDR) plans, FSA has taken steps to improve the 

accuracy of IDR payment counts, borrower information, 

and communications to improve the overall customer 

experience and accurately provide forgiveness. Additional 

phased improvements will include changes to ensure 

accurate payment counts, borrower self-service options 
FY 2022 AGENCY FINANCIAL REPORT 148 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

to view payment counts, and standardized guidance to 

servicers on administering IDR plans.

In 2019, FSA implemented an improved model for 

verification selection and evaluation of data elements from 

the FAFSA. The model provides the Department with a 

better way to choose filers for verification and to reduce 

improper payments by targeting fewer filers without 

sacrificing the overall degree of confidence. In recent years, 

the verification rate of FAFSA filers has dropped from a 

high of 30% during the 2016-17 FAFSA cycle to 10% 

today. For the 2023-24 FAFSA cycle, the Department 

anticipates that just 7.5% of FAFSA filers will be selected 

for verification.

FSA appropriately administered the total and permanent 

disability (TPD) discharge application process and its 

contractor generally serviced TPD accounts in accordance 

with Federal program requirements. Nonetheless, FSA 

further enhanced its oversight and monitoring of the 

contractor by updating its sampling methodology and 

documenting improved processes. To continue those 

improvements, in 2021, the Department established a data 

match with the Social Security Administration to grant 

discharges more easily to over 350,000 borrowers with total 

and permanent disabilities. This data match enables the 

Department to automatically discharge student loans more 

efficiently and effectively as individuals meet the standards 

to qualify for relief.

For some time, FSA has been actively combating a growing 

number of consumer scams that target borrower interest 

in student loan forgiveness programs. Congress passed the 

Stop Student Debt Relief Scams Act in 2019, and FSA has 

been implementing its requirements. Most recently, FSA’s 

efforts to raise public awareness of scams have included 

communications via social media, direct emails, and the 

website. FSA has also produced a brief video to alert 

and inform borrowers about how to identify and avoid 

these scams.

Oversight of an accrediting agency or state approval agency 

happens through the Department’s recognition process and/

or through follow up on issues brought to the Accreditation 

Group’s attention. These are complex processes that take 

time to gather information and require detailed staff 

reviews. An entity seeking recognition from the Secretary 

of Education (Secretary) must meet the Department’s 

regulatory criteria for the recognition of accrediting 

agencies and state approval agencies and must have a 

Federal Link (Higher Education Act (HEA) or non-HEA). 

Only agencies recognized by the Secretary can provide the 

gate-keeping function to allow institutions they accredit to 

participate in the federal student aid programs under the 

HEA. Accrediting agencies that accredit only educational 

programs located in institutions of higher education apply 

for recognition for non-HEA purposes. The recognition 

process involves reviews by the Department’s Accreditation 

Group (AG) staff and the National Advisory Committee 

on Institutional Quality and Integrity (NACIQI). Both the 

(AG staff and NACIQI) recommendations are submitted to 

the Senior Department Official designated by the Secretary 

who makes the decision regarding recognition. State 

agencies for the approval of public postsecondary vocational 

education and for the approval of nursing education 

must meet separate sets of recognition criteria and their 

applications for recognition also undergo review by the AG 

staff and the NACIQI.

The recognition process is outlined in Section 496 of 

the HEA and in regulation at 34 CFR 602. There are 

limitations on the Secretary’s authority on review of 

accrediting agencies. The Secretary may only establish 

criteria for accrediting agencies or associations that are 

required by the statute. The HEA specifically notes that 

the Secretary may not establish any criteria that specifies, 

defines, or prescribes the standards that accrediting agencies 

or associations use to assess any institution’s success 

with respect to student achievement. The Department 

of Education Organization Act also prohibits us from 

“exercis[ing] any direction, supervision, or control over 

the curriculum, program of instruction, administration, or 

personnel of any educational institution, school, or school 

system, over any accrediting agency or association, or over 

the selection or content of library resources, textbooks, or 

other instructional materials by any educational institution 

or school system, except to the extent authorized by law.”

Grantees

The Department continues to employ a progressive 

improvement approach to addressing the longstanding 

management challenge on oversight and monitoring of 

grant recipients. In FY 2021, the Department prioritized 

the enhancement of its grantmaking processes through 

capacity building and collaboration across the Department’s 

grantmaking Principal Office Components (POCs) to 

ensure effective programmatic and financial stewardship of 

taxpayer funded investments. In FY 2022, the Department 
FY 2022 AGENCY FINANCIAL REPORT 149 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

expanded its focus to include the consistent application of 

risk-based, and data-driven approaches to monitoring to 

improve recipient and grant program outcomes through the 

following initiatives: 

• Improved effectiveness and efficiency of grants trainings 

by categorizing oversight and monitoring courses 

according to the level of experience and expertise of 

both internal and external stakeholders and expanded 

the number of asynchronous trainings for grantees and 

subrecipients, i.e., Subrecipient Monitoring for the 

Grantee Community.

• Implemented Virtual Monitoring Principles, a grant 

monitoring solution intended to enhance the user’s 

experience, while increasing efficiency, collaboration, 

and consistency of risk-based monitoring and technical 

assistance protocols across POCs, and grantee cohorts. 

• Provided technical assistance to POCs focused on 

grantee and subrecipient responsibilities, adhering to 

internal controls, subrecipient monitoring, data quality, 

and reporting. 

• Used innovative monitoring approaches to learn with 

and from grantees, promoting effective implementation 

and timely policy feedback.

• Facilitated program staff information sharing and 

collaborative resolution through sharing challenges in 

monthly and quarterly grant policy forums on oversight 

and monitoring practices, solutions, and resources. 

• Continually assessed the grant-making process to 

identify opportunities for improvements through the use 

of data and collaboration. 

• Targeted the utilization of Grantee Satisfaction Survey 

data results to better define challenges, successes, and 

inform improvements in the areas of technical assistance 

and grant performance reporting across program offices.

• Leveraged inter-agency coordination to POCs in their 

effective oversight and monitoring of 2020 CARES 

Act and 2021 American Rescue Plan Act programs 

and operations to ensure that funds were used for 

the purposes intended and that goals and objectives 

are achieved. 

• Utilized the annual Grantee Satisfaction Survey to 

obtain from the Department’s grant community their 

experiences with the FSRS.gov (Federal Funding 

Accountability and Transparency Act Subaward 

Reporting System) system and reporting process. 

Documented and identified grantees’ successes and 

challenges with FSRS.gov and provided to GSA.gov a 

list that included resolutions to challenges identified 

along with overall recommendations for improvements.

CHALLENGE 3: DATA QUALITY AND 

REPORTING

While the Department’s grantees—states, institutions 

of higher education, and others—serve as important 

intermediaries and partners, our programmatic funds 

ultimately serve our nation’s students and teachers. The 

Department requires quality data from its grantees to 

ensure students and teachers are benefiting from these 

funds in expected ways. These data are also used to build 

evidence, determining whether these funds could have been 

used in more efficient or effective ways. Failure to address 

the root cause of poor-quality data, therefore, may harm 

our ultimate beneficiaries.

Thematically aligned with the findings identified by the 

OIG, the Department identified in FY 2020 the root causes 

for its persistent data quality challenges. In the wake of the 

COVID-19 pandemic, the Department reported to the 

OIG that it would concentrate these data quality efforts 

and apply its strategy to key data collections associated 

with the Education Stabilization Fund (ESF). The 

Department renegotiated and expanded a support contract 

to supplement existing staff resources and expertise. This 

allowed for the development system architecture to identify 

potential data quality issues, many of which required 

resolution prior to acceptance of reports. 

The Department recognizes the challenge that limited 

grantee resources presents to quality reporting. This 

manifests itself not only in the grantee’s reporting to the 

agency, but also in evaluating the quality of data it received 

from any applicable subgrantees. To address capacity 

challenges for grantees, the Department launched an array 

of resources to support ESF grantees, many of which are 

conveniently located on the ESF Grantee Help Portal

for asynchronous access. Covering each of the major ESF 

programs—specifically, HEER, EANS, GEER, ESSER, 

and outlying area equivalent Funds—resources included 

a variety of technical assistance mediums from live and 
FY 2022 AGENCY FINANCIAL REPORT 150 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

recorded webinars to business rule guides to the provision 

of an ESF Reporting Help Desk. 

The Department has acknowledged that it historically 

has not conveyed to its grantees a credible expectation for 

reporting quality data. To address challenges associated with 

credible communication, the agency reaffirmed with the 

Department’s Office of General Counsel (OGC), Office 

of the Secretary (OS), and program office leadership its 

strategy in 2021, recognizing that poor-quality data can 

harm the ultimate beneficiaries of Department grants—that 

is, may harm our nation’s teachers and students. To support 

collection of ESF Year 2 Annual Performance Reports 

(APRs), the Department made clear to grantees minimum 

data quality expectations for performance reporting, as well 

as the potential consequences for failure to report. 

Due in part to these efforts, the Department experienced 

improved reporting compliance, especially considering the 

scope and recency of the programs and collections, as well 

as the prolonged challenges associated with the pandemic. 

The Department, of course, continues to review and 

address isolated data quality issues across all collections, 

especially in areas where known gaps in controls exist. 

However, more serious deficiencies—that is, those where 

data is not of sufficient quality to publish—are rarer. 

The Office of Postsecondary Education (OPE) placed 

noncompliant institutions of higher education (IHEs) that 

had a remaining balance on route payment. In FY 2022, 

this was a total of 40 IHEs that were placed on route 

payment or that were already on route or stop payment 

for other compliance concerns. The Office of Elementary 

and Secondary Education (OESE) works to ensure timely, 

accurate reporting and accountability through the provision 

of robust technical assistance, direct communication 

with senior leadership in state educational agencies, and 

gradual escalation of compliance measures. By the close of 

FY 2022, three grantees have outstanding Year 2 reports: 

two for the outlying area equivalent of the GEER fund and 

one for the outlying area equivalent of the ESSER Fund. 

In an effort to improve the quality of the data in the ESF 

Transparency Portal, OESE continues to: 1. track reporting 

issues and FSRS (GSA’s system) Helpdesk tickets to ensure 

States submit accurate Federal Funding Accountability 

and Transparency Act (FFATA) and subaward data; 2. 

collaborate with OFO to provide direct assistance to 

grantees; and 3. escalate grantees’ system challenges to GSA 

and OMB to resolve systematic problems with the FSRS 

that are outside of the Department’s control.

In addition, a number of other agency-wide initiatives 

were completed, continued, initiated, or planned during 

FY 2022. As a part of the agency’s FY 2022–26 Strategic 

Plan, the agency created a performance metric focused 

on tracking instances where data collections lack data 

quality plans and worked to update the Department’s 

Information Quality Act (IQA) Guidelines, expected to be 

finalized in the first quarter of FY 2023. The Department 

also completed development of a Data Quality Playbook 

to provide easily deployable strategies for program 

offices, especially their grant staff. The Department 

also began developing data quality training tailored to 

different audiences.

In FY 2022, work also continued to modernize the EDFacts 

system and related processes, including data quality checks 

that states can use to supplement their own downstream 

data quality work and disseminating a more standardized 

and complete set of data validation rules applied to the data 

collected via EDFacts. The National Center for Education 

Statistics completed a successful pilot of the new process 

with the Common Core of Data survey, which led to more 

complete and accurate data, better data quality notes where 

data needed to be explained, and earlier publication of 

the data. Federal Student Aid (FSA) developed an internal 

dashboard to track the quality of the data it receives from 

its servicers and ingested into the National Student Loan 

Data System (NSLDS) and Enterprise Data Warehouse & 

Analytics (EDWA), allowing stakeholders to monitor data 

processing and identify specific or systemic problem areas 

by servicer and record type. FSA also deployed the Alation 

data catalog and query management tool to consolidate 

metadata, business rules, and edit processing into one 

enterprise tool that, in addition to becoming the complete 

data catalog, will also provide an effective knowledge 

management tool for FSA.

CHALLENGE 4: IMPROPER PAYMENTS

The Department continued to prioritize efforts to ensure 

payment integrity and minimize improper and unknown 

payments across all programs in FY 2022, including 

programs considered “susceptible to significant improper 

payments” per OMB guidance (OMB Circular A-123, 

Appendix C, implemented by OMB Memorandum M-21-

19). Collaboration between financial management and 

grants administration staff aimed to facilitate successful 

implementation of Payment Integrity Information Act of 

2019 (PIIA) compliance activities (e.g., improper payment 
FY 2022 AGENCY FINANCIAL REPORT 151 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

risk assessment or estimation of programs and activities in 

scope). Improvement action items included:

• Revising the Sampling & Estimation Methodology 

and Plan (S&EMP) for the Title I, Part A program in 

FY 2022 to address the root cause of reported improper 

payments. Additionally, the Department further 

coordinated with its State Educational Agencies (SEAs) 

to ensure they would be able to obtain requested financial 

documentation from their Local Educational Agencies 

(LEAs) to support sampled payment transactions;

• Reviewing the completed payment test plans for the 

Title I, Part A program to ensure they accurately 

represent the data used by statistician to develop the 

estimated improper payment rate, as quality control 

improvement responding to OIG’s review of the 

Department’s FY 2021 compliance with improper 

payment reporting requirements; 

• Continuing to promote improper payment awareness 

and deliver payment integrity training for Department 

staff through, for example, webinars and dialogue 

regarding improper payment sampling and testing 

with dozens of grantees and the Department’s grant 

monitoring and grants policy communities; and

• Continuing to employ the Payment Integrity 

Monitoring Application (PIMA) as a means of 

detecting 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).

As reflected in its report for 2021, the OIG determined 

that the payment integrity reporting for the Pell Grant and 

Direct Loan programs complied with all PIIA reporting 

requirements. However, the OIG asserted its opinion 

that FSA’s use of non-random student-level sampling in 

some compliance audits conducted under the Single Audit 

Act to calculate the estimates affected the appropriateness 

and accuracy of the confidence intervals. As noted in the 

report, FSA believes that compliance audits, which do 

not always require random sampling, provide quality data 

necessary to calculate statistically valid improper payment 

estimates and confidence intervals. The OIG determined 

that FSA’s proposed actions of requesting and obtaining 

OMB’s approval of FSA’s sampling and estimation plan or 

requiring random student-level samples to be used in Single 

Audit compliance audits, if successfully implemented, were 

responsive to the OIG’s recommendations.

FSA completed the following corrective actions this year:

• FSA continued efforts to obtain OMB’s approval 

that its sampling and estimation plan is acceptable 

considering program resources and characteristics. 

FSA continued to engage OMB Office of Federal 

Financial Management staff in discussions regarding 

OMB approval of FSA’s improper payment sampling 

and estimation methodology plan (S&EMP) pursuant 

to the provisions in PIIA section 3352(c)(1)(A). 

During FY 2022 and as of FY 2022 year end, these 

discussions were ongoing to address FSA’s formal request 

for approval.

• FSA continued to collaborate with OMB, the OIG, 

Departmental components, and the independent 

audit community to include requirements for random 

sampling in compliance audits conducted under 

the Single Audit Act. However, the OIG and the 

independent audit community strongly opposed 

inclusion of the random sampling requirement, stating 

that it would compromise auditor independence. 

Consequently, FSA agreed to retract its recommendation 

of random sampling. However, FSA successfully 

advocated to retain language in the FY 2022 OMB 

Compliance Supplement of prior updates to clarify the 

procedures auditors must perform and information 

auditors should provide to the Department. These 

updates better align the requirements for compliance 

auditors in the Compliance Supplement with the 

payment integrity requirements for Federal agencies in 

OMB Circular A-123, Appendix C. 

CHALLENGE 5: INFORMATION 

TECHNOLOGY SECURITY

FY 2022 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:

• Implemented a new cybersecurity policy framework 

aligned with Executive Order (EO) 14028 Improving 

the Nation’s Cybersecurity and National Institute of 
FY 2022 AGENCY FINANCIAL REPORT 152 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

DEPARTMENT COMMENTS

Standards and Technology (NIST) Special Publication 

800-53, Revision 5. 

• Implemented the Ongoing Security Assessment & 

Authorization (OSA) program, which will reduce 

steps and modify artifacts to improve efficiency. The 

overall outcome is more frequent system stakeholder 

engagement and timely risk visibility. 

• Continued to mature its risk management processes 

through enhancements to the Cybersecurity Framework 

(CSF) Risk Scorecard to monitor status of program-level 

business continuity planning and testing activities. 

• Enhanced its automated cybersecurity reporting 

to track and report compliance to ED 14028 

mandates including, but not limited to, Multifactor 

Authentication (MFA), encryption, and resiliency. 

• Expanded the Vulnerability Disclosure Policy (VDP) 

program to cover all internet accessible Department 

systems. 

• Updated our internal vulnerability management 

procedures in accordance with Binding Operational 

Directive (BOD) 22-01 Reducing the Significant Risk 

of Known Exploited Vulnerabilities. 

• Took action to address M-22-09 Moving the U.S. 

Government Toward Zero Trust Cybersecurity 

Principles by creating, funding, and onboarding a GS15 zero-trust architecture (ZTA) program manager and 

released a Department Strategy and project schedule for 

full implementation by the end of FY 2024. 

• Received the initial transfer of Technology 

Modernization Fund (TMF) funds to establish a ZTA 

Program Management Office (PMO) and completed the 

recompete of Enterprise Identity, Credential, and Access 

Management (ICAM) program, and obtained Secure 

Access Service Edge (SASE) & Security Orchestration 

Automation & Response (SOAR) capabilities. 

• FSA Enterprise Cybersecurity Group and FSA 

Enterprise Data Directorate worked together to develop 

a fraud detection analytics capability in partnership 

to identify occurrences of potential fraud. This initial 

model permits FSA to identify applicants that met 

criteria of potential fraud and put them into the Suspect 

Identify File (SIF) so that they would be selected for 

identity verification. This model is being fine-tuned for 

accuracy with the goal to become part of the FSA data 

science toolkit on fraud detection. 

• FSA Enterprise Cybersecurity Group implemented 

a formal quality assurance process to ensure account 

recertifications are conducted in accordance with 

Department requirements.

• FSA Identity and Access Management (IAM) team 

in the Technology Directorate recently completed the 

Global Password Change for StudentAid.gov, FSA ID 

user accounts in the Person Authentication Service 

(PAS) system. Over 22.7 million of our 83 million users 

have already logged in and changed their passwords.

• In July 2022, MFA Phase 1 was successfully deployed, 

making MFA mandatory to all new users as part of 

the Create Account process on StudentAid.gov. MFA 

Phase 2 will be deployed, allowing FSA the capability to 

enforce MFA enablement for existing users on a rolling 

basis. Due to the timing of the MFA rollout coinciding 

with other high priority FSA initiatives, it is being 

recommended the MFA Phase 2 rollout start February 

2023, to be completed July 2023.

These enhancements contributed to the OIG’s FY 2022 

Federal Information Security Modernization Act of 2014 

(FISMA) assessment of the Department’s cybersecurity 

capabilities as “Effective,” or a Level 4 Cybersecurity 

Maturity Level for FY 2022, which marks a significant 

improvement from FY 2021 and the first time the 

Department has achieved this level with seven of nine 

FISMA domains increasing in score.
FY 2022 AGENCY FINANCIAL REPORT 153 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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 104 and the Department’s management 

assurances on page 25.

SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion: Disclaimer of Opinion 

Restatement: No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 1 1 0 1 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 2022 AGENCY FINANCIAL REPORT 154 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

Payment Integrity Information Act Reporting

ll 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 should not have been made 

or 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 received 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.

DESCRIPTION OF RISK-SUSCEPTIBLE 

AND HIGH-PRIORIT Y PROGR AMS 

In FY 2022, the Federal Pell Grant, William D. Ford 

Federal Direct Loan, and Title I, Part A programs 

continued to be designated as programs that are 

“susceptible to significant improper payments” (referred 

to as Phase 2 per OMB Circular A-123, Appendix C 

guidance). The Federal Pell Grant program remained an 

OMB-designated high-priority program. Additionally, 

at the conclusion of the FY 2021 improper payment risk 

assessment, the Department identified the Education 

Stabilization Fund (ESF) and the Special Education 

Grants to States, Individuals with Disabilities Education 

Act (IDEA) programs 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 
FY 2022 AGENCY FINANCIAL REPORT 155 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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.

FEDER AL PELL GR ANT 

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. 

WILLIAM D. FORD FEDER AL 

DIRECT LOAN 

The Direct Loan Program, added to HEA in 1993 by 

the Student Loan Reform Act of 1993, authorizes the 

Department to make loans through participating schools 

to eligible undergraduate and graduate students and 

their parents.

SPECIAL EDUCATION GR ANTS 

TO STATES

The Special Education Grants to States, Individuals with 

Disabilities Education Act (IDEA) program provides 

formula grants to assist the 50 states, the District of 

Columbia, Puerto Rico, the Department of the Interior, 

Outlying Areas, and the Freely Associated States in meeting 

the excess costs of providing special education and related 

services to children with disabilities. To be eligible for 

funding, states must serve all children with disabilities 

between the ages of 3 through 21, except that they are 

not required to serve children aged 3 through 5 or 18 

through 21 years if services are inconsistent with State 

law or practice or the order of any court. A state that does 

not provide a free appropriate public education (FAPE) 

to children with disabilities aged 3 through 5 cannot 

receive base payment funds attributable to this age group 

or any funds under the Preschool Grants program. Funds 

are allocated among states in accordance with a variety of 

factors, as outlined in the funding formula under section 

611(d) of the Individuals with Disabilities Education 

Act (IDEA).

EDUCATION STABILIZATION FUND

On Friday, March 27, 2020, the Coronavirus Aid, Relief, 

and Economic Security Act (CARES Act) was signed into 

law. It was a $2 trillion package of assistance measures, 

including $30.75 billion for an Education Stabilization 

Fund. The Coronavirus Response and Relief Supplemental 

Appropriations Act, 2021 (CRRSA Act), was signed into 

law on December 27, 2020, and provided an additional 

$81.9 billion to the Education Stabilization Fund. 

Additionally, on March 11, 2021, the American Rescue 

Plan (ARP) was signed into law and provided an additional 

$169.5 billion. To date, eight grant programs were created: 

Education Stabilization Fund Discretionary Grants, 

Governor’s Emergency Education Relief Fund, Elementary 

and Secondary School Emergency Relief Fund, Homeless 

Children and Youth, Emergency Assistance to Non-Public 

School, Outlying Areas, Bureau of Indian Education, and 

Higher Education Emergency Relief Fund.

TITLE I, PART A

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

Education Act, as amended by 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 2022, the Department used statistically valid 

sampling and estimation methodologies to estimate the 

improper payment rates for the Pell Grant, Direct Loan, 

IDEA, ESF 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, IDEA, 

ESF and Title I improper payment estimates in FY 2022 and 

prior years, please visit https://paymentaccuracy.gov.

IDENTIFIED AND RECAPTURED 

IMPROPER PAYMENTS

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 has determined that payment 

recapture audits would not be cost effective for any of its 

loan and grant programs or for contracts. A comprehensive 

report on the cost effectiveness of the various recapture 

audit programs can be found in the Department’s FY 2012 

Report on the Department of Education’s Payment 

Recapture Audits.

The Department identifies and recovers improper payments 

through sources other than payment recapture audits 

and works with grantees and Title IV (FSA) program 

participants to resolve and recover amounts identified 
FY 2022 AGENCY FINANCIAL REPORT 156 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

in compliance audits, OIG audits, and Departmentconducted 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 2022, readers can visit 

https://paymentaccuracy.gov.
FY 2022 AGENCY FINANCIAL REPORT 157 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

he 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/2022/04/20/2022-08222/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) 02-03-21 04-20-22 $ 42,163

Failure to provide information regarding teacherpreparation programs20 USC 

1022d(a)(3) 02-03-21 04-20-22 35,119

Violation of Title IV of the HEA 20 USC 1082(g) 02-03-21 04-20-22 62,689

Violation of Title IV of the HEA 20 USC 

1094(c)(3)(B) 02-03-21 04-20-22 62,689

Failure to disclose information to minor children and parents 20 USC 

1228c(c)(2)(E) 02-03-21 04-20-22 1,850

Improper lobbying for government grants and contracts

31 USC 

1352(c)(1) and 

c(2)(A)

02-03-21 04-20-22 22,021 to 220,213

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

and (a)(2) 02-03-21 04-20-22 12,537

Civil Monetary Penalty Adjustment for Inflation
FY 2022 AGENCY FINANCIAL REPORT 158 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

limate change impacts on students, families, 

schools, and communities across the country 

are present, severe, and worsening. Pathways 

through which climate change affects student achievement 

include school closures due to extreme weather or unsafe 

conditions, poor environmental conditions within schools 

that impede learning, students’ own personal health and 

safety, increased social and emotional anxiety related to 

climate change and extreme weather events, and increased 

migration and economic disruption for households and 

communities. 

In September 2021, the Department released a new 

FY 2021 Climate Adaptation Plan. With this new 

plan, the Department acknowledges that climate change 

is affecting the Department’s mission and the need for 

comprehensive and urgent action to promote adaptation 

and resilience through the Department’s programs and 

operations. This plan builds on the lessons learned from 

the Department’s past sustainability action plans, climate 

change adaptation plans, and environmental justice plans 

to offer new actions that the Department can undertake 

to better adapt to climate change and develop agency 

resilience and resilience across the nation’s schools.

Climate Adaptation Plan
FY 2022 AGENCY FINANCIAL REPORT 159 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

he goal of the Grants Oversight and New Efficiency Act of 2016 (GONE) (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 and Budget 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, 2022, the Department had 239 grants and cooperative 

agreements totaling approximately $131.1 million in various statuses of the closeout process. 

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 requirements that align with the OIG recommendations. 

(6.16.1) (A) (3)

Each year the Office of Acquisition, Grants, and Risk Management (OAGRM) offers 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. 

Table 16

Category 2–3 Years 3–5 Years > 5 Years

Number of Grants/Cooperative 

Agreements with Zero Dollar 

Balances

108 5 -

Number of Grants/Cooperative 

Agreements with Undisbursed Dollar 

Balances

119 7 -

Total Amount of Undisbursed 

Balances $49,336,249 $14,523,161 -

Source: G5, grants management system linked to the Department’s general ledger system. Data is based on the performance end date of September 30, 2021.

The Grants Oversight and New Efficiency Act of 2016 (GONE Act) and 

Education’s Grant Closeout Process
FY 2022 AGENCY FINANCIAL REPORT 160 U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION (UNAUDITED)

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