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.