OTHER

INFORMATION
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FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 107

CI V IL MONETA RY PENA LT 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.

T H E GR A NTS OV ER SIGHT A ND NE W 

E F F ICI E NC Y (G ON E) AC T OF 2016 

A ND EDUC AT ION’S GR A NT 

CLOSEOUT PROCESS

This section provides a high-level summary of the 

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

cooperative agreements.

REAL PROPERTY3

The Department’s Space Modernization Program strives 

to bring a new approach to its workplaces: by building 

greater employee performance and productivity through 

innovative space designs and technology enhancements, 

while reducing the agency’s space footprint and associated 

out-year costs. Updated square footage information is 

posted on performance.gov at https://www.performance.

gov/real-property-metrics/.

3 This subsection does not have its own page due to the limited requirements 

provided in the Office of Management and Budget (OMB) Circular A-136.

The Other Information section includes:

OFFICE OF I NSPEC TOR 

GENER A L’S (OIG) M A NAGE M ENT A ND 

PERFORMANCE CHALLENGES

Management and Performance Challenges Report 

provides a summary of what the OIG believes are the 

Department’s biggest challenges for FY 2021. The OIG 

identified the following five challenges: (1) Implementing 

the Coronavirus Aid, Relief, and Economic Security Act 

(CARES Act), (2) Oversight and Monitoring, (3) Data 

Quality and Reporting, (4) Improper Payments, and 

(5) Information Technology Security. The full report is 

available at the OIG website.

SU MM A RY OF FI NA NCI A L 

STAT E M ENT AU DIT A ND 

MANAGEMENT ASSURANCES

The Summary of Financial Statement Audit and 

Management Assurances provides information about the 

material weaknesses reported by the agency or through the 

audit process.

PAY M ENT I NT EGR IT Y I NFOR M AT ION 

ACT REPORTING

This section summarizes the Department’s 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.

ABOUT THE OTHER INFORMATION SECTION
108 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | MEMORANDUM FROM THE OFFICE OF INSPECTOR GENERAL

 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 109

OFFICE OF INSPECTOR GENERAL’S (OIG) MANAGEMENT 

AND PERFORMANCE CHALLENGES FOR FISCAL 

YEAR 2021

MANAGEMENT CHALLENGE 1—

C A R E S AC T 

The Coronavirus Aid, Relief, and Economic Security Act 

(CARES Act) was signed into law on March 27, 2020, and 

includes more than $30 billion in emergency education 

funding for students, elementary and secondary schools, 

postsecondary institutions, and States in response to 

the Coronavirus Disease 2019 (COVID-19) pandemic. 

The CARES Act also allowed the U.S. Department of 

Education (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

The CARES Act poses new challenges for the Department 

as it must effectively oversee and monitor new grant 

programs and additional Federal education funds, 

implement additional student financial assistance program 

requirements, and ensure that quality data are reported. 

While the CARES Act provides $40 million to the 

Department for student aid administration and $8 million 

for program administration, the Department must design 

and implement these processes timely and effectively to 

help ensure the overall success of its CARES Act activities.

New Grant Programs and Additional Federal 

Education Funds 

The CARES Act provided about $30.8 billion for an 

Education Stabilization Fund to prevent, prepare for, and 

respond to COVID-19. This new funding authorized 

under the CARES Act is about 64 percent of the amount 

Source: U.S. Department of Education Agency Financial Report FY 2019 and 

the CARES Act

Figure 14. FY 2019 Non-Pell Grant Outlays 

and CARES Act Education Stabilization 

Fund Appropriation

(Dollars in Billions)

that the Department reported as grant outlays for fiscal 

year (FY) 2019, excluding the Pell Grant program. 

The Education Stabilization Fund includes more than 

$16 billion for State and local agencies and about $14 

billion for higher education. As shown in Table 4 below, 

this includes three large new relief funds and additional 

discretionary grant programs.

 
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Each of the new 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 COVID-19. Overall, the effective oversight and monitoring of CARES Act funds are critical to ensure that 

they are used for the purposes intended and that goals and objectives are achieved. Because the CARES Act programs have 

different purposes, allowable uses of funds, and grant recipients, it is vital that the Department provides effective guidance, 

training, technical assistance, and outreach. These additional responsibilities pose a significant challenge to the Department 

given the large amount of funding involved, the number of entities receiving funds, and the need to administer its existing 

programs. Additionally, the Department must ensure that the primary recipients, such as Governors’ offices and SEAs, 

effectively fulfill their critical role in overseeing and monitoring subrecipients, such as LEAs.

Student Financial Assistance Program Requirements

The CARES Act includes student financial assistance provisions intended to provide emergency relief to borrowers and to 

allow institutions to meet student needs more easily. These provisions include borrower and teacher assistance provisions, 

waivers of student financial assistance refunds and loan cancellations, and adjustments to lifetime Pell Grant and subsidized 

Direct Loan usage. The Department will need 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 will be challenged to provide adequate oversight of existing student aid program participants 

while it implements and oversees the student aid provisions in the CARES Act. Additionally, the Department faces the 

challenge of ensuring that postsecondary institutions continue to meet financial responsibility requirements, as the 

pandemic may negatively impact the enrollment and financial health of many institutions.

Data Quality 

The CARES Act includes several reporting provisions that are intended to provide transparency and public accountability 

regarding the use of funds and their estimated impact on the economy. For example, all institutions that receive Higher 

Education Emergency Relief funds and all grantees that receive more than $150,000 in CARES Act funding are required 

Program Funding Overview

Higher Education 

Emergency Relief 

Fund

$13.9 billion Provided $13.5 billion in formula grants for postsecondary institutions for costs that include COVID-19 

prevention, preparation, and response to COVID-19. An additional $349 million is provided to postsecondary 

institutions that the Department determines have the greatest unmet needs related to COVID-19. 

Postsecondary institutions must use no less than 50 percent of funds received under Section 18004(a)(1) of 

the CARES Act to provide emergency financial aid grants to students.

Elementary and 

Secondary School 

Emergency Relief 

Fund

$13.2 billion Provided formula grants to SEAs, who in turn provide subgrants to LEAs to address the impact of COVID-19 

on elementary and secondary schools. Funds may be used for activities authorized by several Federal 

education laws and a broad range of activities necessary to maintain operations and continuity of services, 

respond to COVID-19, and continue to employ existing staff. 

Governor’s 

Emergency 

Education Relief 

Fund

$3 billion Provided formula grants to Governor’s offices, who in turn provide subgrants to postsecondary institutions 

and LEAs that have been most significantly impacted by COVID-19 and other essential education-related 

entities. Funds are intended to support the impacted entities’ ability to continue to provide educational 

services. The Department encouraged investment of these funds in technology infrastructure and 

professional development to improve capacity in providing high-quality, accessible, distance education or 

remote learning.

Discretionary Grants 

to States

$307.5 million Provided discretionary grants to States with the highest COVID-19 burden. The Department awarded funds 

through two separate grant competitions. Education Stabilization Fund-Rethink K-12 Education Models 

grants ($180 million) provided support to SEAs to address educational needs of students, their parents, and 

teachers. Education Stabilization Fund-Reimagining Workforce Preparation grants ($127.5 million) provided 

support to help States create new educational opportunities and pathways to help citizens return to work, 

small businesses recover, and new entrepreneurs thrive.

Other Funding $307.5 million Provided funding for programs operated or funded by the Bureau of Indian Education and for outlying areas.

Table 4. Education Stabilization Fund Summary
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to publicly report on their use of funds. Administering the programs and operations funded by the CARES Act will require 

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 

CARES Act reported data are accurate and complete.

Ongoing and Planned Work

Our ongoing audit and inspection work related to the CARES Act in this area includes reviews of multiple schools’ use of 

professional judgment to adjust Free Application for Federal Student Aid (FAFSA) data elements, Federal Student Aid’s 

(FSA) implementation of temporary borrower relief to suspend involuntary collections on defaulted student loans, States’ 

monitoring related to Governor’s Emergency Education Relief Fund awards, and the Department’s plan for returning 

employees to Federal offices in the wake of the coronavirus pandemic. 

Additional planned projects for FY 2021 are identified in Table 5 below.

Progress in Meeting the Challenge 

The Department stated that CARES Act grant oversight and monitoring has been a continued focus of senior leadership 

and managers. The Department added that it took immediate steps to ensure appropriate interpretation of CARES Act

requirements, this included the establishment of formal Steering and Operations Committees to administer new grant 

programs and additional Federal education funds. The Department stated it implemented processes that (1) established 

preventative controls; (2) ensured statutory requirements were met; (3) communicated and shared information on 

program implementation, execution, data collection, and reporting; (4) and collaboratively resolved issues. According to 

the Department, these activities enabled it to make nearly all CARES Act formula grant funds available within 1 month of 

enactment, about twice as fast as the first awards under the American Recovery and Reinvestment Act of 2009. 

State and Local Program-Related

Elementary and Secondary School Emergency Relief Fund

• Department oversight of the Elementary and Secondary School Emergency Relief Fund 

• LEAs’ use of funding under the Elementary and Secondary School Emergency Relief Fund for technology purchases

Discretionary Grants

• Department monitoring of Rethink K-12 Education Models Grants

• Department awarding and monitoring of Reimagining Workforce Preparation Grants

Higher Education-Related

Higher Education Emergency Relief Fund

• Department oversight of the Higher Education Emergency Relief Fund

• Schools’ use of funding under the Higher Education Emergency Relief Fund

Student Financial Assistance Program Requirements

• Cancellation of Borrower Loans and Implementation of Return of Title IV Waiver Requirements

• Exclusion of Subsidized Loan Usage and Federal Pell Grant Lifetime Usage

• Department’s processes to implement flexibilities to Teacher Education Assistance for College and Higher Education grant service obligations

Table 5. Anticipated FY 2021 CARES Act Related Work
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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 benefit from Federal 

financial assistance for education beyond high school. FSA 

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

is responsible for implementing and managing the Federal 

student financial assistance programs authorized under 

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

These programs provide grants, loans, and work-study 

funds to students attending colleges or career schools. FSA 

directly manages or oversees a loan portfolio of over $1.5 

trillion, representing almost 210 million student loans to 

more than 45 million borrowers. FSA also oversees about 

6,000 postsecondary institutions that participate in the 

Federal student aid programs. 

In FY 2019, FSA performed these functions with 

an administrative budget of $1.7 billion and 1,251 

employees, along with contractors that provide outsourced 

business operations. From FY 2015 to FY 2019, FSA 

delivered an average of $124.2 billion in Federal student 

aid to an average of 12.2 million students.

The Department stated that its staff has provided support 

that included written guidance, blog posts, webinars, 

technical assistance, and post-award calls. The Department 

added that that it approved the addition of 25 temporary 

staff to assist with CARES Act related administrative, 

monitoring, and oversight workload. The Department 

further indicated that it plans to develop a centralized portal 

that will disseminate information regarding Education 

Stabilization Funds and serve as a tool for grantees to 

submit data to address annual reporting requirements. 

The Department noted that the CARES Act contained 

provisions to provide substantial relief for student loan 

borrowers. The Department stated that it took actions 

to (1) reduce the interest rate for all federally held 

student loan borrowers to zero, (2) place all borrowers in 

administrative forbearance status, which allowed them 

to temporarily stop making monthly loan payments, 

(3) refund involuntary payments made by borrowers 

with defaulted loans who were subject to having certain 

Treasury payments offset or wage garnishment, and (4) 

ensure all eligible borrowers were notified of the benefits 

afforded to them under the CARES Act. The Department 

added that the $40 million in CARES Act funds provided 

for student aid administration supports communication to 

borrowers explaining changes in loan terms and flexibility 

provisions as well as FSA system changes to implement the 

CARES Act provisions. 

What the Department Needs to Do 

To effectively oversee the CARES Act programs, the 

Department should provide appropriate technical 

assistance to grantees, especially for those who may not 

be familiar with Federal grant requirements; closely 

monitor grant implementation; and ensure that published 

data are of sufficient quality for use in assessing program 

compliance and effectiveness. 

To implement the student financial assistance related 

CARES Act provisions, waivers, and flexibilities, the 

Department needs to continue to provide guidance to and 

work with postsecondary institutions, contracted servicers, 

collection agencies, guaranty agencies, and accrediting 

agencies. The Department also needs to monitor and 

oversee these entities to ensure that the provisions are 

implemented effectively. Lastly, when these provisions 

expire, the Department will need to carefully reinstate 

the student loan provisions for which the relief was 

temporarily provided. 
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OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2021 | OTHER INFORMATION

Within the Department, FSA administers the Federal student assistance programs, and the Office of Postsecondary 

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

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

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

postsecondary institutions and programs offer.

Why This Is a Challenge

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

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

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

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

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

accrediting agencies. 

Audits Relating to Student Financial Assistance Programs 

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

of noncompliance as well as opportunities for the Department to further improve its processes. The Office of Inspector 

General’s (OIG) recent audit-related work within this area has covered a wide range of activities, as shown in Table 6 on the 

following page.

Figure 15. Student Aid Delivered and Postsecondary Students Receiving Aid FYs 2015–2019

 

Source: Federal Student Aid Annual Reports FY 2015–FY 2019
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Activities 

Reviewed Review Results

Accreditation We found that the Department’s process for reviewing agency petitions for recognition did not provide reasonable 

assurance that the Department recognized only agencies meeting Federal criteria. We also reported that the Office of 

Postsecondary Education’s post-recognition oversight was not adequate to ensure agencies consistently and effectively 

carried out their responsibilities.

Contractor 

Oversight

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

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

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

federally held student loans. 

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

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

Heightened Cash 

Management

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

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

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

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

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

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

required documentation.

Satisfactory 

Academic Progress

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

findings that independent public accountants identified in compliance audits and FSA identified in program reviews.

Total and 

Permanent Disability 

(TPD) Discharges

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

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

the TPD discharge application review process that may negatively affect the operating efficiency and effectiveness of the 

process and increase the risk that FSA approves applications that are inaccurate or incomplete. We also found weaknesses 

in FSA’s documented procedures and its quality control review for its TPD discharge application review process, as well as 

weaknesses in FSA’s monitoring of the TPD discharge process.

Verification of 

FAFSA Data

We found that FSA did not evaluate its process for selecting FAFSA data elements that institutions 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.

Table 6. OIG’s Recent Reports Relating to the Oversight and Monitoring of Student Financial 

Assistance Programs
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Ongoing and Planned Work

Our ongoing audit and inspection work in this area includes reviews of the Department’s compliance with regulations 

in its recognition of a selected accreditor, the Department’s involvement in and oversight of activities related to the sale 

and operations of a chain of career colleges, FSA’s controls over the FAFSA verification process, FSA’s accountability as a 

performance based organization, and selected schools’ controls over Clery Act reporting. Additional planned projects for FY 

2021 include audits of schools’ compliance with career pathway programs and ability to benefit provisions, the Department’s 

plans and processes to proactively monitor the financial health of postsecondary schools, FSA’s transition to the Next 

Generation Financial Services Environment, and FSA’s implementation of its Next Generation Payment Vehicle Account 

Program pilot.

Progress in Meeting the Challenge

The Department and FSA stated that it has taken steps and has additional plans to improve its oversight and monitoring of 

the student financial assistance programs. This included activities related to schools, accreditors, and its FAFSA verification 

process. FSA stated that it worked to address weaknesses in the single audit process that will improve its usefulness as a 

school oversight tool and that it deployed an analytical model that will improve its ability to identify at-risk schools and 

better prioritize support. The Department stated that it plans to implement additional procedures to identify accrediting 

agencies having a higher risk of noncompliance with statutory and regulatory requirements and would subsequently 

prioritize oversight of those agencies. FSA also stated that it implemented an improved model for verification selection and 

evaluation of data elements from the FAFSA. According to FSA, this will allow the Department to better identify applicants 

for whom errors would result in a change in their Federal aid award, potentially reducing improper payments. 

FSA further noted that the Fostering Undergraduate Talent by Unlocking Resources for Education Act could help it ensure the 

accuracy of income information used to determining Pell Grant eligibility and allow borrowers to more easily recertify their 

income to stay enrolled in income-driven repayment plans. 

Investigations of Student Financial Assistance Program Participants

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

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

Area Example of Related Investigative Activity

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

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

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

The incentive compensation ban protects students against admissions and recruitment practices that serve the financial 

interests of the recruiter rather than the educational needs of the student.

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

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

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

student assistance. 

Program 

Participants

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

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

earning a high school diploma to receive student financial assistance.

Distance Education 

Fraud Rings

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

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

in order to fraudulently obtain Federal student aid.

Table 7. OIG’s Recent Investigative Activity Relating to the Student Financial Assistance Programs
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What the Department Needs to Do

The Department needs to continue its efforts to enhance 

its oversight of student financial assistance programs, 

participants, and partners. This includes taking steps to 

ensure that its management of related internal control 

systems is effective to ensure that they are appropriately 

designed and implemented, operating as intended, and 

correcting identified weaknesses in a timely manner. 

The Department further needs to ensure its oversight 

functions work together to effectively provide the 

intended additional protections to students and taxpayers. 

While FSA’s Next Gen initiative has significant potential 

to improve FSA’s ability to oversee and hold accountable 

its key contractors servicing Federal student aid, the 

initiative is still being implemented. It will be important 

for FSA to ensure that this initiative is effectively 

implemented and that it follows through to hold its 

contractors accountable for effectively administering their 

responsibilities. The Department should position itself 

to assess the effectiveness of its initiatives to improve 

oversight of student financial assistance programs by 

setting goals for and measuring results that demonstrate 

progress of its efforts.

Our audits and investigations of student financial 

assistance program participants and audits of the 

Department’s related oversight and monitoring processes 

will continue to assess a variety of effectiveness and 

compliance elements. This area remains a management 

challenge given our continued findings in this area.

Oversight and Monitoring—Grantees

The Department is responsible for administering 

education programs that Congress authorized and the 

President signed into law. This responsibility includes 

awarding program funds to eligible recipients and 

monitoring their progress in meeting program objectives, 

ensuring that programs are administered fairly, 

ensuring grants are executed in conformance with both 

authorizing statutes and laws prohibiting discrimination 

in federally funded activities, collecting data and 

conducting research on education, and helping to focus 

attention on education issues of national importance. 

The funding for many grant programs flows through 

primary recipients, such as SEAs, to subrecipients, such 

as LEAs or other entities. The primary recipients must 

oversee and monitor the subrecipients’ activities to ensure 

compliance with Federal requirements.

The Department’s early learning, elementary, and 

secondary education programs annually serve about 

18,400 school districts and more than 55 million students 

attending more than 98,000 public schools and 34,000 

private schools. The Department awards discretionary 

grants using competitive processes and priorities and 

formula grants using formulas determined by Congress. 

In all cases, the Department’s activities are governed by 

the program authorizing legislation and implementing 

regulations. One of the key programs the Department 

administers is Title I, Part A, which provided about $17 

billion in FY 2020 for local programs that provide extra 

academic support to help an estimated 25 million students 

in high-poverty schools meet State academic standards. 

Another key program is the Individuals with Disabilities 

Education Act, Part B Grants to States. This program 

provided more than $12.7 billion in FY 2020 to help 

States and school districts meet the special educational 

needs of an estimated 7 million students with disabilities.

Why This Is a Challenge

Effective monitoring and oversight are essential to ensure 

that grantees meet grant requirements and achieve program 

goals and objectives. Our recent audits related to several 

grant programs identified weaknesses in grantee oversight 

and monitoring that included concerns with SEA and LEA 

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

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

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

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

activities identified in Table 8 below.

Area Reviewed Review Results

Adult Education We identified opportunities for an SEA to better ensure that it used funds in compliance with applicable laws and regulations 

and obtained and reviewed single audit reports of subgrantees.

Auditee Response 

to Prior Audit 

Findings

In our series of work on the status of corrective actions on previously reported Title I findings at four school districts, we found 

weaknesses in the design or implementation of related procedures at three of the four districts.

Charter Schools, 

Replication and 

Expansion Grants

In the first of a series of audit work in this area, we found that a nonprofit charter management organization did not fully 

comply with Federal grant reporting requirements and did not always spend grant funds in accordance with Federal cost 

principles and its grant application. 

Disaster Recovery We have issued five audit 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 relating to Restart allocations and uses of funds found that one audited SEA established and implemented 

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

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

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

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

better maintain and manage its records for the Restart program.

• Our work relating to the Temporary Emergency Impact Aid for Displaced Students (EIA) program found that an SEA did not 

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

with Federal requirements and that LEAs did not use program funds to pay salaries only for employees who supported 

schools with displaced students.

McKinneyVento Homeless 

Assistance Act

We found that an SEA generally provided effective oversight of LEAs and coordinated with other entities to implement selected 

requirements related to identifying and educating homeless children and youths. However, we noted that the SEA could 

improve its internal controls by better documenting policies, procedures, and roles.

Table 8. OIG’s Recent Reports Relating to SEA and/or LEA Implementation of Federal Education 

Grant Programs
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Our recent audits of the Department’s oversight and monitoring processes over several grant programs identified internal 

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

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

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

Area Reviewed Review Results

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

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

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

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

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

Every Student 

Succeeds Act

We found that the Department designed processes that would provide reasonable assurance of (1) identifying and resolving 

potential instances of State plans’ noncompliance with applicable requirements and (2) 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, ensure that the Department determined whether some peer reviewers 

had conflicts of interest or the appearance of conflicts of interest, 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.

Federal Funding for 

Charter Schools

We found that the Department’s oversight and monitoring efforts were not effective to ensure that the SEAs performed 

charter school closure processes in accordance with Federal laws and regulations. The Department did not provide 

adequate guidance to SEAs on how to effectively manage charter school closures and did not monitor SEAs to ensure that 

they had an adequate internal control system for the closure of charter schools.

Indian Education We identified weaknesses in the Department’s monitoring activities that included a lack of policies and procedures on 

monitoring grantees’ performance and use of funds. We found that monitoring efforts were primarily limited to ensuring that 

grantees spent funds by established deadlines.

Rehabilitative 

Services

We identified weaknesses in controls over the data quality of case service reports in areas that included monitoring 

procedures, data certifications, and procedures related to the use of edit check programs.

Investigations of Federal Education Grant Program Participants

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

the areas identified in Table 10 below.

Subject Area Example of Related Investigative Activity

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

contracts, committed bribery, and made kickback payments.

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

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

fraudulent checks. 

Charter School 

Officials

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

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

Table 9. OIG’s Recent Reports Relating to the Department’s Oversight and Monitoring of Federal 

Education Grant Programs

Table 10. OIG’s Recent Investigative Activity Relating to Federal Education Grant Programs
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acquired contractor assistance to develop a standard virtual 

monitoring program for its discretionary and formula 

grant programs. 

The Department stated that it has implemented initiatives 

intended to ensure that grants management systems 

can be used to effectively collect grantee data, analyze 

performance, and detect risk. This includes plans to create 

a more modern, modular, secure, and user-friendly grants 

management system that meets the needs of all internal 

and external users. The Department added that it has 

continued to enhance its Entity Risk Review capabilities 

to conduct risk assessments for grant applicants 

recommended for initial or continuation funding. This 

application provides administrative, financial, and internal 

controls information by linking disparate data sets.

What the Department Needs to Do

The Department’s oversight and monitoring of grantees 

remains a management challenge given our continued 

findings in this area. However, the Department continues 

to report progress in enhancing its grantee oversight 

processes, citing numerous actions it has taken to address 

risks, including those identified in a number of OIG 

audit reports, and to improve outcomes across multiple 

program offices. The Department should continue its 

efforts to offer common training, encourage collaboration 

and communication within and across program offices, 

and take steps to ensure that its program offices are 

consistently providing effective risk-based oversight of 

grant recipients—to include both technical assistance and 

monitoring. The Department should also ensure that passthrough entities are providing effective oversight of their 

subrecipients and identifying and correcting any instances 

of noncompliance. Further, to the extent that it is using 

contractors to assist in improving and modernizing its 

grants management capabilities, the Department should 

ensure that deliverables are received timely and meet 

specifications. 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 

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.

Ongoing and Planned Work

Ongoing work in this area includes reviews of the 

Charter School Program Grants for Replication and 

Expansion of High-Quality Charter Schools, Restart, 

and EIA programs, and oversight of virtual charter 

schools’ implementation of selected requirements under 

IDEA. Planned projects for FY 2021 include work on 

Statewide accountability systems under the Every Student 

Succeeds Act, controls over Student Support and Academic 

Enrichment Program grants, and the effectiveness of 

Charter School Program Grants in increasing the number 

of high-quality charter schools. 

Progress in Meeting the Challenge

The Department indicated that it has taken steps to 

improve its oversight and monitoring of grantees. This 

included activities to define skills needed by grants 

administration staff and improve their expertise, 

enhancing policy and related training opportunities, 

advancing and standardizing award and virtual monitoring 

processes, and improving grants management systems.

The Department stated that it has prioritized building 

the capacity of grants administration staff to provide 

appropriate oversight and monitoring. This included 

creating a competency model, career map, and training 

plan for the grant management job series. The Department 

stated that this initiative was intended to identify core 

competencies and training opportunities needed to close 

competency gaps. 

The Department added that it revised the discretionary 

grant policy to provide a more comprehensive guide for 

administering grants in a standardized manner across 

program offices. The Department also stated that it 

developed and provided comprehensive training resources 

and continuing education workshops for program office 

staff and technical assistance resources related to internal 

controls requirements for grant recipients.

The Department noted that it reviewed the continuation 

award process to encourage cross-office alignment and 

provided training to promote a stronger continuation 

funding process. The Department added that it continued 

to leverage virtual monitoring approaches to provide 

necessary oversight and support to grant recipients, 

updated a resource related to virtual monitoring, and 
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M A NAGE M ENT CH A L L ENGE 3—DATA QUA LIT Y A ND R EPORT I NG 

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 18,400 public school districts and 98,000 public schools; about 6,000 

postsecondary institutions, including universities and colleges, as well as institutions offering technical and vocational 

education beyond the high school level; and surveys of private schools, public elementary and secondary schools, students, 

teachers, and principals. 

Why This Is a Challenge

The Department, its grantees, and its subrecipients must have effective controls to ensure that reported data are accurate and 

complete. The Department relies on program data to evaluate program performance and inform management decisions. 

Audits and Inspections Involving Data Quality and Reporting 

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

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

Area Reviewed Review Results

Adult Education We found that an SEA used incomplete data obtained from two educational regions, two adult education centers, and one 

subgrantee to prepare its program performance report. 

Borrower Defense We found that FSA did not have an adequate information system to manage borrower defense claim data. We also identified 

weaknesses with FSA’s procedures to review and process borrower defense claims. 

Clery Act In the first of a series of audits, we found a postsecondary institution did not have effective controls to ensure that it reported 

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

and accurate and did not provide reliable information to current and prospective students, their families, and other members 

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

Disaster Recovery We found that an SEA did not ensure that the data it provided to the Department were accurate and complete.

Graduation Rates In a series of reports on SEAs’ processes to calculate and report graduation rates, we concluded that internal controls at 

each of the SEAs that we reviewed did not provide reasonable assurance that reported graduation rates were accurate and 

complete. We identified specific weaknesses that included lack of oversight of LEA controls over data quality and processes. 

Specifically, some LEAs improperly included or excluded students from graduate rate calculations based on Federal 

requirements. 

Income-Driven 

Repayment Plans

We found that the Department could have provided more detailed information on specific income-driven repayment plans and 

its loan forgiveness programs to fully inform decision makers and the public about current and future program management 

and financial implications of these plans and programs.

McKinneyVento Homeless 

Assistance Act

We found that an SEA conducted edits and reasonableness checks of data that LEAs submitted, but it did not review LEA 

homeless student data when conducting monitoring reviews. We also noted that LEAs were not required to certify that controls 

over the data were working as intended and known issues were disclosed. 

Table 11. OIG’s Recent Data Quality Related Reports
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Ongoing and Planned Work

Ongoing work in this area includes additional reviews of 

the accuracy and completeness of displaced student count 

data provided by SEAs under the EIA program, and an 

additional review of the accuracy and completeness of 

a school’s campus crime statistics under the Clery Act. 

Planned projects for FY 2021 include additional work 

related to the EIA program and reviews of Charter School 

Program grants. 

Progress in Meeting the Challenge

The Department stated that it is developing a coordinated 

approach to data governance, data management, and data 

quality to ensure that education data provide high value 

for internal decision makers and external stakeholders. The 

Department added that it has taken comprehensive steps 

to promote cohesive data governance initiatives, build 

staff capacity around data, and improve data management 

practices and systems.

The Department stated that it established an agencywide Data Governance Board to take agency-wide 

action in developing an open data culture, improving 

the Department’s capacity to leverage data as a strategic 

asset for evidence building and operational decisions, 

and developing the data skills of staff. The Department 

noted that the Data Governance Board initiated the 

Department’s first data maturity assessments that 

will allow the Department to evaluate itself against 

documented best practices, determine gaps, and identify 

priority areas for improvement. The Department expects 

the assessments to provide a baseline to measure progress 

and growth and to be used to guide the creation of 

its inaugural data strategy and inform program office 

investment decisions.

The Department stated that it also identified an approach 

to address root causes and improve data quality that 

included ensuring grantee awareness of their data 

responsibilities and consequences for noncompliance. 

The Department noted that the approach also includes 

provisions to improve the varying capacity of grantees in 

reporting data and among Department staff in reviewing 

grantee-reported data. The Department expects this effort 

will include technical assistance to grantees, additional 

resources for data quality review, and expanded use of 

technological solutions to automate and reduce the need 

for manual reporting and review.

The Department stated that it initiated a process to 

develop a data strategy to realize the full potential of data 

to improve education outcomes. The Department stated 

that this effort includes agency-wide discussions about 

data priorities that will help improve data maturity and 

will focus on the Department’s capabilities to leverage 

data, operationalize and optimize data governance, and 

drive cultural change for the benefit of all stakeholders. 

The Department also identified system- and programspecific activities that included improving the quality and 

use of Government and Performance Results Act measures, 

launching a new annual performance reporting tool for the 

Office of Special Education Programs formula grantees, 

and implementing a central unified data platform for FSA 

aid lifecycle data. 

What the Department Needs to Do

The Department’s efforts to improve the quality of data are 

critically important to program management. While the 

Department has made progress in strengthening grantees’ 

data quality processes, findings from our recent audit 

reports show that this area remains an ongoing challenge. 

The Department should continue its efforts to promote 

strong data management practices across its program 

offices, from the development of sound data collection 

protocols to the implementation of comprehensive data 

verification processes. As discussed in its response, the 

Department should ensure that it uses the results of 

its data maturity assessments to measure progress and 

growth and to guide the creation of its inaugural data 

strategy and related action plans, inform program office 

investment decisions, and track its returns on those 

investments. The Department should also continue 

performing outreach to States and other entities that 

report data to the Department to reinforce requirements 

and expectations around good data quality practices—of 

particular importance given the substantial amount of 

funding for new programs and emphasis on transparency 

and accountability under the CARES Act. Lastly, the 

Department should continue to monitor the quality of the 

data it receives, work to implement effective controls to 

address known weaknesses, and take steps to ensure that 

strong data management practices are implemented across 

the Department as well as by its grantees and subgrantees.
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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 

and meet improper payment reduction targets, and (6) 

report improper payment rates of less than 10 percent. 

Additionally, an Inspector General must evaluate the 

accuracy and completeness of the agency’s reporting and 

performance in preventing, reducing, and recapturing 

improper payments. 

Why This Is a Challenge

The Department must ensure that the billions of dollars 

entrusted to it reach the intended recipients. The 

Department identified the Federal Pell Grant (Pell) and 

the William D. Ford Federal Direct Loan (Direct Loan) 

programs as susceptible to significant improper payments, 

and OMB has designated these programs as highpriority programs, which are subject to greater levels of 

oversight. The Department changed its improper payment 

estimation methodologies for both the Pell and Direct 

Loan programs for FY 2019 and reported a significant 

decrease in improper payments in those programs from 

FY 2018. However, we found that its FY 2019 estimates 

for the Pell and Direct Loan programs were unreliable 

because they were not statistically valid. It is important 

for the Department to develop valid and reliable estimates 

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

prevent and reduce improper payments. Figure 3 shows 

the reported improper payment estimates for these two 

programs from FY 2017 through FY 2019.

MANAGEMENT CHALLENGE 4—

IMPROPER PAYMENTS

“Improper payments” are payments the government 

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

the wrong reason. Although not all improper payments 

are fraudulent or represent a loss to the government, all 

improper payments degrade the integrity of government 

programs and compromise citizens’ trust in government. 

To reduce instances of improper payments, agencies must 

properly identify the cause of the improper payment, 

implement effective mitigation strategies to address 

the cause, and regularly assess the effectiveness of those 

strategies, refining them as necessary.

The Payment Integrity Information Act of 2019 (PIIA) 

reorganized and revised several existing improper 

payments statutes, including the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA). PIIA 

requires Federal agencies to reduce improper payments 

and to report annually on their efforts. It specifically 

requires that each agency, in accordance with guidance 

prescribed by the Office of Management and Budget 

(OMB), periodically review all programs and activities 

that the agency administers and identify those that may 

be susceptible to significant improper payments. For 

each program and activity identified as susceptible to 

significant improper payments, the agency is required 

to produce a statistically valid estimate (or an estimate 

that is otherwise appropriate using a methodology that 

OMB approved) of the improper payments made by each 

program and activity. The agency must include those 

estimates in the accompanying materials to its annual 

Agency Financial Report. 
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The authorizing legislation for the Restart (total FY 2019 outlays of $34 million) and EIA (total FY 2019 outlays of $160 

million) programs designated them as susceptible to significant improper payments, thereby requiring the Department to 

report improper payment estimates for these programs beginning with its FY 2019 Agency Financial Report.

Audits and Inspections Involving Improper Payments

The OIG’s most recent statutorily required work found that the Department complied with improper payment reporting 

requirements. However, as shown in Table 12 below, our audits identified opportunities for improvement in multiple areas. 

Figure 16. Pell and Direct Loan Improper Payment Estimates FY 2017–2019

 

Source: U.S. Department of Education Agency Financial Reports (FY 2017–FY 2019)

FY Complied 

with IPERA Identified Concerns

2019 Yes The Department published improper payment estimates for the Pell, Direct Loan, Emergency Impact Aid, 

and Restart programs as required by IPERA. However, we found that the published estimates for three of 

these programs were unreliable because the methodologies used to develop them were not statistically 

valid. 

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

recaptured improper payments in its FY 2018 Agency Financial Report. As a result, we could not accurately 

evaluate the Department’s performance in recapturing improper payments for its programs and activities. 

2017 No The Department did not meet all requirements for compliance with IPERA because it did not meet its 

reduction target for the Pell program.

Table 12. Results of Recent OIG Statutorily Required Improper Payment Audits
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Other audit work has identified potential improper 

payments in the student financial assistance programs and 

by SEAs and LEAs. Our semiannual reports to Congress 

from April 1, 2017, through March 31, 2020, included 

more than $725 million in questioned costs from audit 

activity and more than $94 million in restitution payments 

from investigative activity. These examples demonstrate 

that there may be other potential opportunities for the 

Department to identify and prevent improper payments.

Ongoing and Planned Work

Planned projects include our annual review of the 

Department’s compliance with the improper payment 

reporting requirements and its performance in preventing, 

reducing, and recapturing improper payments. We 

will also complete the required risk assessment of the 

Department’s purchase card program and, if deemed 

necessary, conduct an audit of Department purchase 

card transactions. Our planned activities for FY 2021 

include multiple projects involving grant recipients where 

improper payments could be identified.

Progress in Meeting the Challenge

The Department stated that it is addressing this 

management challenge on several fronts. The Department 

stated that it performed compliance activities in FY 2020 

that included improper payment estimation of programs 

deemed susceptible to significant improper payments 

and qualitative and quantitative improper payment risk 

assessments for programs and activities. The Department 

added that it reviewed and revised its methodology for 

the Emergency Impact Aid program in FY 2020 and that 

it strengthened its risk assessment process to include an 

improper payment threshold analysis of all its programs 

and activities.

According to the Department, FSA implemented a 

daily pre-payment interface with the Department of the 

Treasury’s Do Not Pay web service that matches intended 

recipients with multiple data sources to identify potential 

improper payments. The Department noted that it is 

participating in a pilot with the Do Not Pay analytics team 

to research possible payment integrity checks that could be 

applied to the Department’s payment data.

According to the Department, FSA continued to refine 

its methodology to estimate improper payments. The 

Department also noted that FSA worked with OMB to 

gain increased support for using compliance audit data 

as improper payment estimation and added requirements 

for compliance auditors to provide FSA with population 

and sample information necessary to estimate improper 

payments. Additionally, the Department stated that FSA 

also implemented enhanced quality control procedures 

over its improper payment estimation process to increase 

validation of compliance audit data and calculations 

and ensure only sustained questioned costs, rather than 

questioned costs, identified in compliance audits are used 

in improper payment estimates.

What the Department Needs to Do 

The Department needs to ensure that revised estimation 

methodology for the Emergency Impact Aid program is 

properly implemented and documented. The Department 

needs to ensure that the refined estimation methodologies 

for the Pell and Direct Loan programs produce statistically 

valid and rigorous improper payment estimates that 

are consistent with the requirements in OMB Circular 

A-123 Appendix C. 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 2020 

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 2020 PIIA audit. Depending on whether the OIG 

finds issues with these estimation methodologies and 

estimates, this Management Challenge Area is subject to 

review and reconsideration.
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MANAGEMENT CHALLENGE 5—

I NFOR M AT ION T ECH NOLOGY 

SECURITY

The Department’s systems house millions of sensitive 

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

used to process billions of dollars in education funding. 

These systems are primarily operated and maintained by 

contractors and are accessed by thousands of authorized 

people (including Department employees, contractor 

employees, and other third parties such as school financial 

aid administrators). As shown in Figure 4, as of September 

30, 2020, the Department reported $844 million in total 

information technology (IT) spending for FY 2020 and 

estimated that it would spend more than $886 million on 

IT in FY 2021. The estimated FY 2021 spending is a 28.2 

percent increase from the reported FY 2018 level. 

Figure 17. Department Total IT Spending FY 

2017–2020 (Dollars in Millions)

(Dollars in Billions)

 

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 

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

of September 30, 2020.

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

FSA has its own chief information officer, whose 

primary responsibility is to promote the effective use of 

technology to achieve FSA’s strategic objectives through 

sound technology planning and investments, integrated 

technology architectures and standards, effective systems 

development, and production support.

The Federal Information Security Modernization Act of 2014

(FISMA) requires the OIG to assess the effectiveness of the 

agency’s information security program. FISMA mandates 

that this evaluation includes (1) testing of the effectiveness 

of information security policies, procedures, and practices 

of a representative subset of the agency’s information 

systems and (2) an assessment of the effectiveness of the 

information security policies, procedures, and practices of 

the agency. 

Why This Is a Challenge

In light of increased occurrences of high-profile data 

breaches (public and private sector), the importance 

of safeguarding the Department’s information and 

information systems cannot be understated. Protecting 

this complex IT infrastructure from constantly evolving 

cyber threats is an enormous responsibility and challenge. 

Without adequate management, operational, and 

technical security controls, the Department’s systems and 

information are vulnerable to attacks. Unauthorized access 

could result in lost data confidentiality and integrity, 

limited system availability, and reduced system reliability. 

For the last several years, IT security audits and financial 

statement audits have identified security controls that 

need improvement to adequately protect the Department’s 

systems and data. 

Audits Involving IT Security

Our recent reports on the Department’s compliance with 

FISMA, performed by the OIG with contractor assistance, 

noted that the Department and FSA made progress 

in strengthening their information security programs. 

However, as shown in Table 13, our recent FISMA 

audits included audit findings across all five cybersecurity 

framework security functions developed by the Council of 

the Inspectors General on Integrity and Efficiency, OMB, 

and the Department of Homeland Security and within 

each of security function’s related metric domains. Our FY 

2017 through FY 2019 FISMA audits concluded that the 

Department and FSA were not effective in any of the five 

security functions—Identify, Protect, Detect, Respond, 

and Recover. 
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FY Identify: Risk 

Management

Protect:

Configuration 

Management

Protect:

Identity 

and Access 

Management

Protect:

Data 

Protection 

and Privacy

Protect:

Security 

Training

Detect: 

Information 

Security 

Continuous 

Monitoring

Respond: 

Incident 

Response

Recover: 

Contingency 

Planning

2019 Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding

2018 Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding Audit Finding

2017 Audit Finding Audit Finding Audit Finding N/A3 Audit Finding Audit Finding Audit Finding Audit Finding

3

 Data protection and privacy was not a metric domain for the FY 2017 FISMA audit.

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

information security program so that they fully comply with all applicable requirements. Our FY 2019 FISMA audit 

specifically noted that the Department and FSA could strengthen their controls in areas such as (1) corrective action 

plan remediation (risk management); (2) reliance on unsupported operating systems, databases, and applications in its 

production environments (configuration management); (3) fully implementing two-factor authentication (identity and 

access management); (4) performance of timely reviews of system Privacy Impact Assessments (data protection and privacy); 

(5) fully implementing its Continuous Diagnostics and Mitigation program (information security continuous monitoring); 

and (6) ensuring functionality of data loss prevention tools (incident response). We made recommendations to help the 

Department and FSA fully comply with all applicable requirements.

Recent audits of the Department’s financial statements, performed by an independent public accountant with OIG 

oversight, have repeatedly identified IT controls as a significant deficiency. In its most recent report, the independent public 

accountant noted that the Department and FSA management demonstrated progress implementing corrective actions to 

remediate some prior year deficiencies in addressing some of the deficiencies. However, they reported that management 

had not fully remediated prior-year deficiencies in several areas and identified IT control deficiencies in areas such as 

access controls, segregation of duties, and application change controls. The independent public accountant concluded 

that ineffective IT controls increase the risk of unauthorized use, disclosure, disruption, modification, or destruction 

of information and information systems that could impact the integrity and reliability of information processed in the 

associated applications. 

Our investigative work in this area identified a cyber-crime scheme targeting Federal student financial assistance funds. This 

involved the use of phishing to obtain a student’s login credentials and then using this information to access the school’s 

systems to change the student’s direct deposit information. We issued a memorandum that informed the Department that 

the lack of two-factor authentication contributed to this incident and recommended the Department take steps to advise 

schools of this threat. The Department subsequently issued a public advisory regarding the scheme.

Planned projects in this area will determine whether the Department’s and FSA’s overall IT security programs and practices 

were generally effective as they relate to Federal information security requirements.

Progress in Meeting the Challenge

The Department stated that it has made significant progress in addressing this ongoing challenge. This included 

improvements in a wide range of areas such as metric scoring, management of Plans of Actions and Milestones, 

communication and capacity building, data loss prevention, and access management.

The Department noted that it established an improved methodology for quarterly cybersecurity performance improvement 

metric scoring and dashboarding capabilities to gauge specific progress in this area. The Department added that the new 

methodology encompasses the composite scoring from several sources to determine the overall percentage of achievement 

towards the Department’s cybersecurity objectives.

Table 13. Results of OIG FISMA Audits—Cybersecurity Framework Security Functions and Metric 

Domains with Audit Findings
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The Department also stated that significant progress 

had been in its management of Plans of Actions and 

Milestones. The Department reported that the average 

time to close a Plan of Actions and Milestones was reduced 

from 167 days in FY 2019 to 47 days in FY 2020 and that 

it achieved a 68 percent net reduction in past due Plans 

of Actions and Milestones since starting the reporting 

period on October 1, 2019. The Department believed that 

those positive metrics are direct indicators of the progress 

achieved in maturing risk management capabilities and 

reduction capabilities. 

The Department stated that it provided targeted briefings 

on subjects including Cybersecurity Framework Risk 

Scorecard results, phishing exercises, and current cyber 

threats to increase communication and build capacity 

for its stakeholders. The Department also noted that it 

significantly improved its phishing readiness through 

the deployment of the ‘Report Phishing’ button to all 

its Outlook email clients that resulted in the highest 

reporting rates since the launch of the phishing program 

in FY 2014. 

The Department stated that it deployed Data Loss 

Prevention desktop agents to enhance the identification 

of personally identifiable information such as Social 

Security and credit card numbers. Following the passive 

monitoring phase of the deployment, the Department 

expects that additional Data Loss Prevention policies 

will become operational and enhance overall Data Loss 

Prevention capabilities. 

According to the Department, notable progress has 

been demonstrated in the development of an enterprise 

Identity Credential and Access Management solution. The 

Department expects this solution to provide the ability 

to manage enterprise identity, user accounts, and user 

roles centrally and securely within and across Department 

systems and applications. The Department stated that 

it began working to identify system candidates to begin 

building out identities in FY 2020 and plans to deploy the 

Single Sign-On integration in FY 2021.

What the Department Needs to Do

The Department relies on IT to manage its core business 

operations and deliver products and services to its many 

stakeholders. The OIG has consistently reported concerns 

regarding the overall effectiveness of the Department’s 

IT security program through our annual FISMA audits, 

financial statement audits, and management challenges 

reports. While the Department reported significant 

progress towards addressing longstanding concerns, 

managing IT security programs and practices to effectively 

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

ongoing management challenge. Specifically, we continue 

to identify significant weaknesses in our annual FISMA 

audits—despite the Department’s reported corrective 

actions to address our prior recommendations.

We commend the Department for its efforts to address 

these weaknesses and continuing to place a priority on 

improving its IT security program. Our FISMA report 

for FY 2019 noted that the Department and FSA had 

made improvements in developing and strengthening 

their security programs, but also identified continued 

weaknesses. 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, and 

information security continuous monitoring. 

Our FISMA audits will continue to assess the 

Department’s efforts, and this will remain a management 

challenge until our work corroborates that the 

Department’s system of controls achieves expected 

outcomes. To that end, the Department needs to 

effectively address IT security deficiencies, continue 

to provide mitigating controls for vulnerabilities, and 

implement planned actions to correct system weaknesses.
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DEPARTMENT COMMENTS

 
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OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2021 | OTHER INFORMATION

CH A L L ENGE 1: IMPL E M ENT I NG T H E 

CORONAV IRUS A ID, R E LIEF, A ND 

ECONOMIC SECU R IT Y AC T 

(CARES ACT)

New Grant Programs and Additional Federal 

Education Funds; Data Quality

When the CARES Act was passed in March 2020, 

the Department took comprehensive steps to ensure 

appropriate interpretation of the legislation’s requirements 

and subsequent policy and operational implications. 

To successfully administer the new grant programs and 

additional federal education funds provided by the Act, 

the Department immediately established two formal 

committees comprised of Senior Leaders with the expertise 

needed to make decisions and execute against the plans 

with accuracy and urgency, as required by the crisis.

The Steering Committee was responsible for the 

overarching policy decisions and oversight for 

implementation at the highest level. The Operations 

Committee was charged with programmatic 

implementation of the decisions made by the Steering 

Committee, which included confirming appropriate 

systems, processes, and procedures were in place to make 

awards and ensure necessary funds control and reporting 

transparency. With representation from Senior Leaders 

across the Department—the Office of the Secretary (OS), 

the Office of the Under Secretary (OUS), the Office of 

Finance and Operations (OFO), the Office of the General 

Counsel (OGC), the Office of Planning, Evaluation, and 

Policy Development (OPEPD), the Office of Elementary 

and Secondary Education (OESE), and the Office of 

Postsecondary Education (OPE)—the Committees 

considered recommendations for policy options, as well as 

business process modifications from additional experts in 

supporting working groups.

Specifically, OFO took comprehensive steps to ensure 

preventative funds control at the onset by establishing the 

necessary account structures and funds control measures 

to maintain segregation from other grant funding to 

ensure ease of tracking and reporting of status of CARES 

Act funds in real time from the General Ledger. Experts 

from grantmaking offices worked with program attorneys 

and Budget Service to ensure statutory requirements 

were appropriately met. The Office of Legislation and 

Congressional Affairs, Budget Service, and OPEPD met 

weekly with Congressional Appropriations Committee 

staff to provide status updates on program implementation 

and execution and to collaboratively troubleshoot any 

issues relating to timelines or other policy questions. 

The OFO/Office of Financial Management (OFM) 

provided regular reports to the Office of Management and 

Budget (OMB) on status of grant awards, and OPEPD 

worked with OMB on decisions related to program 

implementation and the Department’s approach to data 

collection and reporting requirements.

This collaborative process facilitated appropriate allocation 

methodologies, preventative funds control measures, and 

development of criteria for non-formula awards; as a 

result, the Department allocated and awarded CARES Act

formula grant funds with unprecedented speed, making 

nearly all funds available within one month of enactment, 

roughly twice as fast as the first awards under the American 

Recovery and Reinvestment Act of 2009. The Committees 

met regularly until funds were dispersed and continue to 

meet on an ad hoc basis, as needed.

The Department recognized from the beginning 

that oversight and monitoring of grants would be a 

management challenge, and this has been a continued 

focus of senior leadership, as well as line managers; 

the overall progress the Department has made in this 

area can be found detailed in the Challenge 2 section 

below. However, since the CARES Act awards represent a 

significant portion of the grants portfolio, several efforts 

will be called out specifically in this Challenge area.

Despite the extraordinary number and size of CARES 

Act awards and expedited grantmaking timeline, which 

was undertaken on top of the ongoing administration of 

the Department’s $70 billion annual portfolio of existing 

programs, Department staff collaborated effectively to 

provide effective and timely support to eligible applicants, 

grantees, and stakeholders. This support included written 

guidance, blog posts, webinars with stakeholders, direct 

technical assistance to new grantees, post-award calls, 

“office hours” on reporting requirements, and a dedicated 

shared mailbox: COVID-19@ed.gov to handle inquiries. 

The Department also approved the addition of 25 

temporary Full Time Equivalent staff for OPE and OESE 

to support the additional administrative, monitoring, and 

oversight workload required by the CARES Act.

The Steering Committee charged OPEPD’s Office of the 

Chief Data Officer (OCDO) with the development of 

a centralized public-facing portal that will disseminate 

relevant data and information to the public regarding 

the Education Stabilization Funds and their use, as well 

as a tool for grantees to submit data to address annual 

reporting requirements. The portal and data collection 

capability solution will provide comprehensive reporting 
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features and will be bundled with end user help desk 

support and data quality services. The portal and platform 

are intended to leverage data from existing Department 

systems and will be developed using an Agile approach 

to software development—ensuring, where possible, that 

tools are integrated with existing systems.

Student Financial Assistance Program 

Requirements; Data Quality

In addition to the almost $31 billion provided by the 

CARES Act, the Act contained provisions that provided 

substantial relief for student loan borrowers. Following 

the passage of the CARES Act in March, the Department 

began reducing the interest rate for all federally held 

student loan borrowers to 0.0 percent. The Office of 

Federal Student Aid (FSA) worked with its loan servicers 

to ensure that more than 99.98 percent of federally held 

student loans were placed on a 0.0 percent interest rate 

within a matter of weeks. The remaining loans are newly 

disbursed loans that enter the systems at the statutorily 

required rates and are immediately adjusted down to 0.0 

percent for the duration of the CARES Act suspension 

period. Servicers are updating new loans to 0.0 percent 

interest status on a daily or weekly basis, retroactively 

back to the date the borrower entered repayment status. 

On August 8, 2020, President Trump signed an executive 

action that extended Student Loan Relief, continuing 

the temporary cessation of payments and setting interest 

rates to 0.0 percent through December 31, 2020. The 

current student loan relief programs were set to expire on 

September 30, 2020.

The Department automatically placed all borrowers in 

administrative forbearance status, which allowed them to 

temporarily stop making monthly loan payments. Once 

the payment suspension period ends on December 31, 

2020, all non-defaulted borrowers in the federal student 

loan portfolio will be in a current repayment status. 

FSA closely tracks data related to repayments to identify 

the impact of borrowers’ decisions regarding repayment 

to understand current revenue and cost to the federal 

government. FSA has refunded more than 99 percent of 

involuntary payments made by borrowers with defaulted 

loans who were subject to having certain Treasury 

payments offset or wages garnished. FSA notified those 

employers that continued to garnish wages against FSA 

directions. Additionally, FSA worked with its loan servicers 

to ensure all eligible borrowers received personalized 

communications informing them of the benefits afforded 

to them under the CARES Act, e.g., suspension of interest 

and payments, and payment credits. As new borrowers 

have received student loans and entered repayment, 

servicers notify them of these same benefits.

The $40 million provided for Student Aid Administration 

supports extensive communications and notifications 

to borrowers explaining changes in loan terms and 

flexibility provisions as well as FSA system changes to 

implement the CARES Act provisions. Student loan 

model assumptions, cost estimates, and related execution 

transactions for these provisions were performed 

by OFO/Budget Service and officially approved by 

Department Senior Leaders and OMB.

CH A L L ENGE 2: OV ER SIGHT A ND 

MONITORING

Student Financial Assistance Programs

To improve oversight and monitoring of institutions 

of higher education (IHEs) participating in Title IV 

programs, FSA stated that it has worked to address 

weaknesses in the single audit process in order to improve 

its use as an oversight and monitoring tool for IHEs’ 

disbursements of Pell Grants and Direct Loans. In FY 

2020, FSA deployed an analytical model to continually 

monitor partner data and performance. This will improve 

the ability to identify IHEs most at-risk and allow more 

effective use of oversight resources by informing and 

prioritizing support for IHEs.

Over the next several years, the Department will 

implement additional risk-based procedures to evaluate 

an accrediting agency’s ability to effectively determine and 

measure IHE compliance with accreditation standards 

and to identify accrediting agencies at higher risk of 

failing to meet statutory and regulatory requirements 

and additional procedures to prioritize oversight of those 

higher-risk agencies.

FSA implemented an improved model for verification 

selection and evaluation of data elements from the Free 

Application for Federal Student Aid (FAFSA) that allows 

the Department to better identify applicants for whom 

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

potentially reducing improper payments.

The President signed the Fostering Undergraduate Talent 

by Unlocking Resources for Education (FUTURE) 

Act in December 2019, which will help ensure the 

accuracy of income information used for determining 

Pell Grant eligibility. One of the primary causes of 

improper payments in the Pell Grant program is failure 

to accurately verify financial data. The FUTURE Act
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provides an exception to the Department of Education 

from restrictions of Section 6103 of the Internal Revenue 

Code to allow the Department to more easily receive 

income tax data from the Internal Revenue Service (IRS), 

thereby simplifying and improving the accuracy of FAFSA 

filing by prepopulating certain fields. This exception will 

also allow borrowers to more easily recertify their income 

to stay enrolled in Income Driven Repayment plans. At 

this time, Congress has not provided funding to support 

implementation of the FUTURE Act.

Grantees

The Department has prioritized building capacity of grants 

administration staff to provide appropriate oversight and 

monitoring practices to be effective stewards of taxpayer 

funded investments. To that end, the Department has 

considered monitoring approaches across the agency with 

particular attention to the balance between compliance 

and performance. In FY 2020, OFO/Office of Human 

Resources (OHR) partnered with OFO/Office of 

Acquisition and Grants Administration (OAGA) to create 

a competency model, career map, and training plans for 

the grants management job series/category. This initiative 

aims to identify core and technical competencies and 

the respective training opportunities needed to achieve 

competency gap closure. OFO/OHR is in the process of 

identifying a tool to assess and track proficiency levels.

The Department recently revised the Handbook for 

the Discretionary Grants Process, an Administrative 

Communications System Directive, to provide a more 

robust, comprehensive guide for administering grants 

in a standardized manner across program offices. To 

support consistent interpretation and implementation 

of the revised policies and procedures, OFO/OAGA 

has developed and provided comprehensive training 

resources and continuing education workshops (e.g., 

monitoring for outcomes and success, risk assessment and 

mitigation, financial management, and use of a consistent 

grant slate memorandum) for program office staff and 

technical assistance resources related to internal controls 

requirements for grant recipients.

In addition, the Department reviewed the continuation 

award process to promote cross-office alignment and 

provided early training on competition planning to 

support making earlier awards, which will promote a 

stronger continuation funding process (i.e., if grantees 

receive awards well in advance of the start of a school 

year, their annual progress reports will better align with 

continuations decisions).

Given the transition to telework for most Department 

staff and many grantees due to the COVID-19 pandemic, 

the Department continues to leverage virtual monitoring 

approaches to provide necessary oversight and support 

to grant recipients. OFO/OAGA updated a resource 

related to virtual monitoring and is developing additional 

resources to support increased use of virtual monitoring 

resources. The Department examined monitoring practices 

and needs with all program offices and identified best 

practices for sharing monitoring tools and strategies 

(e.g., conducting “Table Talks” discussions for grant staff 

to communicate schedules, and consider establishing 

optional generic monitoring protocols).

The most recent efforts to build grant staff capacity 

allowed the Department to respond swiftly to the 

COVID-19 pandemic and provisions and requirements 

of the CARES Act. The Department has already shifted 

focus to support grant staff to conduct all monitoring 

activities in a virtual environment. In this light, the 

Department has procured a contract solution to develop 

a standard virtual grantee monitoring program for 

ED’s discretionary and formula grant programs. The 

contractor will perform a comprehensive assessment 

of the Department’s “Current State” that includes 

documentation, interviews, and a comparative/gap 

analysis; provide draft recommendations; and work with 

a stakeholder group to define final recommendations 

to achieve the “Target State”, i.e., a Department-wide, 

standard, virtual grantee monitoring program to include 

practices, processes, and virtual collaboration tools; and 

develop and deliver a training course that is based on the 

actual practices, processes, and tools to be used by staff 

when implementing the entire virtual grantee monitoring 

program.

The Department also established a grants management 

acquisition program to resolve non-inherently 

governmental grant award and administrative service gaps 

experienced by program offices. The program is anchored 

by the Education Grants Management Support ServicesBlanket Purchase Agreement (EDGMSS-BPA), which 

sourced a cadre of grant services contractors with capacity 

and know-how to support a range of functions related to 

program offices’ monitoring and oversight responsibilities.

In addition to the steps taken to enhance monitoring and 

oversight capabilities of staff responsible for managing 

grants, the Department has implemented a number of 

initiatives aimed at ensuring grants management data 

systems can similarly provide the support necessary to 

collect grantee data, analyze performance, and detect risk.
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To effectively address the needs of all users—and to 

maximize the return on the Department’s existing 

investment in G5, the Department’s grants management 

system—OFO conducted a business process reengineering (BPR) analysis to inform next steps in the 

G5 Modernization Initiative. The Department envisions a 

modern, modular, secure, and user-friendly G5 that meets 

the grants management needs of all internal and external 

users. The BPR analysis ensured appropriate stakeholder 

involvement in the identification of comprehensive system 

requirements. Ultimately, a final deliverable detailed a 

comprehensive list of core requirements for a modernized 

G5 system.

The Department prioritized the reduction of grantee 

reporting burden by standardizing data collection across 

various information requests. The data elements across a 

collection of 24 unique discretionary annual performance 

reports (APR) were streamlined and standardized into 

a single APR. The implementation of the single APR 

furthers the Department’s priority, while providing 1) staff 

with common and accessible data sets to monitor grantees’ 

progress in meeting program objectives and 2) standard 

data requirements for an enterprise APR tool, as part of 

the G5 Modernization Initiative.

Additionally, the Department has continued to enhance 

its Entity Risk Review (ERR) capabilities to conduct risk 

assessments for grant applicants recommended for initial 

or continuation funding, in accordance with 2 CFR 

200.205. The ERR application supports Department staff 

in assessing applicant and/or grantee risks by providing 

administrative, financial, and internal controls information 

by linking disparate data sets and applying business logic 

to the data. The data are used to inform the Department’s 

grant administration, oversight, and monitoring through 

the use of a standardized set of risk indicators; facilitate 

program offices’ efforts to analyze grantee risk prior to 

making awards and during the life of a grant project; 

make Single Audit findings and other information about 

organizations’ fiscal health available and accessible to 

program staff; and facilitate data sharing across grant 

programs and among Department offices.

The data logic and capabilities of the ERR have been well 

documented and have been referenced during functional 

requirements gathering processes for the data collection 

and reporting portal being developed to address the 

CARES Act data collection requirements (as mentioned 

in Challenge 1) and to inform the Department’s 

comprehensive and cohesive efforts to modernize the G5 

Grants Management system to address the significant 

data needs related to collecting, analyzing, and reporting 

on grantee performance data—much needed oversight 

capabilities that are similarly referenced in Challenge 3.

The Department continues to assess technology solutions 

and other best practices for improving monitoring 

capabilities across the grants lifecycle. The OMB 

Memorandum M-19-16, Centralized Mission Support 

Capabilities for the Federal Government, created the 

Quality Service Management Offices (QSMOs) for select 

mission-support function, tasking QSMOs with offering 

and managing a marketplace of effective and efficient 

solutions to be implemented across the government. 

The Department of Health and Human Services (HHS) 

was pre-designated as the Grants Management QSMO 

to transform government-wide grants management 

end-to-end, and the Department has been actively 

involved in these collaborative efforts to share its unique 

perspectives and help identify best practices and process 

improvements. To that end, the Department is partnering 

with HHS on several initiatives designed to identify 

enhanced tools and services to support grants management 

across the government. Because of the ERR’s successful 

implementation across program offices, the Department 

is well- positioned to pilot the HHS Grant-recipient 

Digital Dossier risk management tool during FY 2021 

to assess capabilities and benefits to pre- and post-award 

monitoring processes.

CH A L L ENGE 3: DATA QUA LIT Y 

AND REPORTING

In response to additional authorities granted by the 

President and Congress to manage education data as a 

strategic asset, the Department is developing a coherent 

and coordinated approach to data governance, data 

management, and data quality to ensure that education 

data provide high value for internal decision makers 

and external stakeholders. To specifically improve the 

quality and accuracy of data collected from grantees, the 

Department has taken comprehensive steps to promote 

cohesive data governance initiatives, build staff capacity 

around data, and improve data management practices 

and systems.

An agency-wide Data Governance Board (DGB) was 

established and met for the first time in November 2019. 

The DGB is charged with taking agency-wide action to 

develop an open data culture, improve the Department’s 

capacity to leverage data as a strategic asset for evidence 

building and operational decisions, and develop the 

data skills of staff throughout the agency. In the spring 
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of 2020, the DGB initiated the Department’s first data 

maturity assessment (DMA), conducted both at the 

agency and individual Principal Office (PO) level. These 

assessments allow the Department to evaluate itself against 

documented best practices, determine gaps, and identify 

priority areas for improvement. The DMA assessed 

maturity levels for data quality across three process areas: 

Data Quality Strategy, Data Quality Assessments, and 

Data Cleansing. These process areas describe best practices 

for detecting, assessing, and cleansing data defects to 

ensure fitness for intended uses in business operations, 

decision making, and planning. The results of the DMA 

will provide the baseline for the Department and program 

offices to measure progress and growth in FY 2021 and 

will be used to guide the creation of agency’s inaugural 

data strategy, inform program office investment decisions, 

and provide agency leadership with the ability to track 

year-over-year return on those investments.

The Department also identified a multi-pronged approach 

to address root causes and improve data quality during 

FY 2020. The approach includes ensuring grantees are 

aware of their data responsibilities under the conditions 

of their grants and of the credible consequences for 

noncompliance—ranging from additional informal 

monitoring through termination of the grant. It also 

includes provisions to improve the varying capacity of 

grantees in reporting data and varying capacity among 

Department staff in reviewing grantee-reported data. 

When fully deployed, this effort is largely expected to take 

the form of technical assistance to grantees, additional 

resources for the Department for data quality review, and 

expanded use of technological solutions to automate and 

reduce the need for manual reporting and review.

Exigent circumstances, volume of new grant funds, 

and other challenging environmental factors led the 

Department to immediately deploy a variation of that 

strategy for key data collections associated with the 

Education Stabilization Fund—specifically, the Higher 

Education Emergency Relief, Governor’s Emergency 

Education Relief, Elementary and Secondary School 

Education Relief, and equivalent Outlying Area funds. 

The Department executed a contract to develop a data 

collection portal, implement a data management solution 

to support internal and external reporting, and launch 

a public transparency website. In addition to early 

communications to grantees about expectations for data 

quality, several components of the data collection process 

include explicit data quality components, including 

auto- population of known data values in the collection 

instrument, help desk services for grantees submitting 

performance data, a data management platform that 

imposes business rules to improve data quality, and 

established phases for opening, closing, and reopening the 

tool for grantees to submit data quality corrections.

In the summer of FY 2020, the DGB also initiated a 

process to develop an ED Data Strategy to realize the 

full potential of data to improve education outcomes. 

Finalization and adoption of that formal Data Strategy is 

expected in November 2020. This Department-wide effort 

includes agency-wide discussions about data priorities 

that will help improve data maturity and will focus on the 

Department’s capabilities to leverage data, operationalize 

and optimize data governance, and drive cultural change 

for the benefit of all stakeholders. The DGB identified 

the following four goal areas to guide data modernization, 

improvement efforts, and future investments: 

strengthening agency-wide data governance; building 

human capacity to leverage data; advancing the strategic 

use of data; and improving data access, transparency, 

and privacy. At least one objective within this strategy 

is expected to focus on data quality and development of 

an action plan to deploy the multi-pronged approach 

outlined in paragraph three, above.

These coordinated, cross-agency efforts are in addition 

to a variety of system-specific or office-specified efforts 

accomplished in FY 2020. The OCDO launched a 

partnership with Budget Service, the Grants Policy 

Office, and OAGA to improve the quality and use of 

Government and Performance Results Act measures. As part 

of this initiative, OCDO supported OESE and the Office 

of Special Education and Rehabilitative Services in the 

development of new and updated measures for 

grant programs. Additionally, the Department launched a 

new annual performance reporting tool in FY 2020 for the 

Office of Special Education Programs formula grantees, 

providing an online system to submit responses and review 

data in a user-friendly format. The tool reduces reporting 

burden and improves data quality by using EDFacts to 

pre-populate data and match the format needed for the 

performance indicators. It meets current security standards 

and addresses issues identified with prior tools.

Through its Next Gen initiative, FSA began the 

development and implementation of the Enterprise Data 

Management and Analytics Platform Services (EDMAPS) 

which will provide a central unified data platform for 

FSA aid lifecycle data. In FY 2020, FSA implemented a 

master data management platform (pMDM) and a data 
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lake (Data Lake) for the swift ingestion, presentation, and 

management of structured and unstructured data from 

various internal and external sources. In FY 2021, FSA 

will co-locate pMDM, Data Lake, and the Enterprise 

Data Warehouse and Analytics into the single EDMAPS 

system hosted in the FSA Cloud General Support Services 

in Amazon Web Services. This effort will provide FSA a 

central hub for system data and enable the re-engineering 

of FSA siloed legacy systems such as National Student 

Loan Data System, the Central Processing System, and the 

Debt Management and Collection System, as well as the 

consolidation of the multiple loan servicers into one EDowned servicing system. In collaboration with the IRS, 

FSA also initiated changes to its programs to help ensure 

the accuracy of income information used for determining 

Pell Grant eligibility, which are now possible as a result of 

the FUTURE Act which was signed into law in December 

2019. As indicated previously, implementation of the 

FUTURE Act will allow FSA to receive income tax data 

directly from the IRS which would simplify FAFSA filing 

and improve accuracy.

CHALLENGE 4: IMPROPER PAYMENTS

Most of the assistance that the federal government 

provides to students comes through its student loan 

programs and the Federal Pell Grant Program. A primary 

cause of improper payments is the Pell Grant and Direct 

Loan Programs. The Department is addressing this 

management challenge on several fronts.

OFO/OFM continued to perform Improper Payments 

Elimination and Recovery Act compliance activities in 

FY 2020, including improper payment estimation of 

programs deemed susceptible to significant improper 

payments, as well as qualitative and quantitative improper 

payment risk assessments for programs and activities 

in scope. The Department reviewed and revised its 

methodology for the Emergency Impact Aid program 

and implemented the revised methodology in FY 2020. 

Written procedures are in development and due at the end 

of December 2020. The Department also strengthened its 

risk assessment process to include an improper payment 

threshold analysis of all its programs and activities.

In September 2020, FSA implemented a daily prepayment interface with the Department of the Treasury’s 

Do Not Pay web service that matches intended recipients 

with multiple data sources to identify potential improper 

payments. OFO/OFM is also participating in a pilot 

with the Do Not Pay analytics team to research possible 

payment integrity checks that could be applied to the 

Department’s payment data.

Lastly, FSA continued to refine the statistically valid 

methodology it implemented in FY 2019 to estimate 

improper payments, including random sampling from a 

population of more than 5,700 schools. It used improper 

payment data from Single Audit Act compliance audits 

of the sampled schools. FSA worked with OMB to gain 

increased support of using compliance audit data for 

improper payment estimation and added requirements 

for compliance auditors to provide FSA with population 

and sample information necessary to estimate improper 

payments. FSA also collaborated with OMB to revise 

and clarify the requirements in OMB Circular A-123 

Appendix C for statistically valid and rigorous improper 

payment estimation methodologies. OMB’s draft 

revisions of sections of the Circular removed references 

to randomized sampling from the requirements for 

statistically valid estimation methodologies. The draft 

sections also require IGs, in performing their annual 

audits, to evaluate the adequacy of Sampling and 

Estimation Methodology Plans when determining 

program compliance and whether the improper payment 

estimate is representative of the program’s annual improper 

payments. If the IG determines that a program is noncompliant for this criterion, the final IG report must 

provide concrete recommendations regarding the specific 

actions and steps the program must take to achieve 

compliance with this criterion. FSA also implemented 

enhanced quality control procedures over its improper 

payment estimation process to increase validation of 

compliance audit data and calculations and ensure only 

sustained questioned costs, rather than questioned costs, 

identified in compliance audits are used in improper 

payment estimates.

CH A L L ENGE 5: I NFOR M AT ION 

TECHNOLOGY SECURITY

The Department has made significant progress in addressing 

the ongoing challenge of information technology security. 

To gauge specific progress in this area, the Department 

established an improved methodology for quarterly 

cybersecurity performance improvement metric scoring 

and dashboarding capabilities, leveraging the Federal 

IT Acquisition Reform Act (FITARA) cyber scoring 

methodology (Department Federal Information Security 

Management Act (FISMA) Risk Management Assessment/

IG FISMA maturity score). The new methodology 

encompasses composite scoring from the Quarterly 
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Risk Management Assessment score, the Cybersecurity 

Framework Risk Scorecard results, the previous year’s IG 

FISMA maturity score, and the Department of Homeland 

Security Cyber Hygiene Scorecard, to determine the overall 

percentage of achievement towards the Department’s 

cybersecurity objectives.

Significant progress has been made to maintain an 

accurate system inventory, communicate the impact 

of identified cybersecurity risks, and actively manage 

the Plans of Actions and Milestones (POA&Ms)—i.e., 

the management tools for tracking the mitigation of 

cybersecurity program and system level findings and 

weaknesses. The Department’s Office of the Chief 

Information Officer (OCIO) publishes Cybersecurity 

Framework Risk Scorecards that serve as a tool to prioritize 

and mitigate risks to the Department’s information 

systems. The Scorecard was recently enhanced to include 

privacy scoring and daily reporting, enabling stakeholders 

to manage cybersecurity risks more effectively in nearreal time and in concert with privacy risks to further 

reinforce the relationship between the Department’s 

Information Security and Privacy Programs. To that end, 

OCIO leaders also engaged with the National Institute 

of Standards and Technology’s Security and Privacy 

Implementation Collaboration Tiger Team to promote 

more effective integration of cybersecurity and privacy 

across government.

To increase communication and build capacity for 

Department stakeholders, OCIO has provided targeted 

briefings on a variety of subjects, including Cybersecurity 

Framework Risk Scorecard results, phishing exercises, 

and current cyber threats. Through continued outreach 

and communication with principal office leadership and 

operational stakeholders, the Department saw the average 

time to close a POA&M reduced from 167 days in 2019 

to 47 days in FY 2020. The number of accepted risk 

POA&Ms also dropped from 53 to 29 during the same 

time period. At the closing of FY 2020, the Department 

achieved a 68 percent net reduction in past due POA&Ms 

since starting the reporting period on October 1, 2019. 

These positive metrics are direct indicators of the progress 

achieved in maturing risk management capabilities and 

reduction capabilities. The Department significantly 

improved its phishing readiness through the deployment 

of the ‘Report Phishing’ button to all Department 

Outlook email clients, allowing users to directly report 

suspicious emails with a single click of a button—a simple 

solution that resulted in the highest reporting rates since 

the launch of the phishing program in FY 2014 and 

continues to yield a substantial increase in reports.

The Department deployed Data Loss Prevention (DLP) 

desktop agents on Department endpoint devices to further 

enhance the identification of personally identifiable 

information, such as Social Security and credit card 

numbers. Following the passive monitoring phase of 

the deployment, additional DLP policies will become 

operational and further enhance overall DLP capabilities.

Notable progress has been demonstrated in the 

development of an enterprise Identity Credential and 

Access Management solution. This solution is expected 

to provide the ability to manage enterprise identity, user 

accounts, and user roles centrally and securely within 

and across Department systems and applications. In FY 

2020, the Department began working to identify system 

candidates to begin building out identities, and the 

deployment of Single Sign-On integration is planned for 

FY 2021.

Lastly, to mitigate impacts of the COVID-19 pandemic 

on remote stakeholders, OCIO acted promptly to ensure 

the appropriate infrastructure was in place to support 

the shift to a fully virtual work environment. To that 

end, OCIO identified, analyzed, and recommended 

a cloud-based solution to provide rapid expansion of 

the Department’s virtual private network capacity to 

support extensive teleworking capabilities. Additionally, 

the Department delivered an alternative multi-factor 

authentication solution to provide continuity of critical 

business functions during the pandemic. OCIO provided 

targeted outreach to proactively address threats to 

teleworking employees (e.g., warning them of increased 

phishing attempts and other cybercriminal scams that 

target largely at-home workers).
136 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

SUMMARY OF FINANCIAL STATEMENT AUDIT AND 

MANAGEMENT ASSURANCES

The following tables provide a summarized report on the Department’s financial statement audit and its management 

assurances. For more details, the auditors’ report can be found beginning on page 92 and the Department’s management 

assurances on page 20.

SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion: Unmodified

Restatement: No

Material Weaknesses Beginning Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 1 1 1 0 1

SUMMARY OF MANAGEMENT ASSURANCES

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

(FMFIA) 2

Statement of Assurance: Unmodified

Material 

Weaknesses Beginning Balance New Resolved Consolidated Reassessed Ending Balance

Total Material 

Weaknesses 0 0 0 0 0 0

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

Effectiveness of Internal Control over Operations—FMFIA 2 

Statement of Assurance: Unmodified

Material 

Weaknesses Beginning Balance New Resolved Consolidated Reassessed Ending Balance

Total Material 

Weaknesses 0 0 0 0 0 0

Conformance with Financial Management System Requirements—FMFIA 4

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

Nonconformances Beginning Balance New Resolved Consolidated Reassessed Ending Balance

Total 

Nonconformances 0 0 0 0 0 0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

1. System Requirements No lack of compliance noted No lack of compliance noted

2. Federal Accounting Standards No lack of compliance noted No lack of compliance noted

3. United States Standard General Ledger at Transaction Level No lack of compliance noted No lack of compliance noted
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 137

PAYMENT INTEGRITY INFORMATION ACT REPORTING

OMB Memorandum M-18-20 defines an improper 

payment as any payment that should not have been made 

or that was made in an incorrect amount under statutory, 

contractual, administrative, or other legally applicable 

requirements. Incorrect amounts are overpayments 

or underpayments that are made to eligible recipients 

(including inappropriate denials of payment or service, any 

payment that does not account for credit for applicable 

discounts, payments that are for an incorrect amount, and 

duplicate payments). An improper payment also includes 

any payment that was made to an ineligible recipient or 

for an ineligible good or service, or payment for goods or 

services not received (except for such payments authorized 

by law). In addition, when an agency’s review is unable 

to discern whether a payment was proper as a result of 

insufficient or lack of documentation, this payment should 

also be considered an improper payment.

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, third-party oversight, 

assessments of audit reports, and financial reporting. 

The number and dollar value of improper 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 payments. In 

designing controls, the Department attempts to strike 

the right balance between making timely and accurate 

payments and ensuring that controls put in place are 

not too costly or overly burdensome and thereby deter 

intended beneficiaries from obtaining funds they are 

entitled to receive. Additionally, the Department must rely 

heavily on controls established by external entities that 

receive Department payments, including federal, state, 

and private organizations and institutions, because they 

further distribute funds they receive from the Department 

to subordinate organizations and individuals. Due to these 

“third-party” controls being outside of the Department’s 

operational control, they present a higher risk to the 

Department, as evidenced by our 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, 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.

DE SCR IP T ION OF R ISK-SUSCEP T IBL E 

A ND HIGH-PR IOR IT Y PROGR A MS 

In FY 2020, the Pell Grant and Direct Loan programs 

continued to be susceptible to significant improper 

payments and remained OMB-designated high priority 

programs. Also, in FY 2020, the Department continued 

monitoring outlays of grant programs receiving funding 

for disaster relief. According to OMB Memorandum 

M-18-14, Implementation of Internal Controls and Grant 

Expenditures for the Disaster-Related Appropriations, 

any disaster-related program with $10 million or more 

in outlays in a given fiscal year is deemed susceptible 

to significant improper payments. The Department 

identified three programs that met this criterion: the 

Temporary Emergency Impact Aid for Displaced Students 

(Emergency Impact Aid), Immediate Aid to Restart 

School Operations (RESTART) and Emergency Assistance 

to Institutions of Higher Education (EAI) programs. 

The Department continues to place additional emphasis 

to ensure payment integrity and minimize improper 

payments in these important programs as required by 

OMB guidance. Readers can obtain a detailed breakdown 
138 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | PAYMENT INTEGRITY

of information on improper payment estimates, root 

causes, and corrective actions for the programs at https://

paymentaccuracy.gov.

PE L L GR A NT 

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. 

DIR EC T LOA N 

The Direct Loan program, added to HEA in 1993 by 

the Student Loan Reform Act of 1993, authorizes the 

Department to make loans through participating schools 

to eligible undergraduate and graduate students and 

their parents.

T E MPOR A RY E M ERGENC Y IMPAC T 

AID FOR DISPLACED STUDENTS

The Temporary Emergency Impact Aid for Displaced 

Students (Emergency Impact Aid) program awards 

emergency impact aid funding to State educational 

agencies (SEAs). SEAs provide subgrants to local 

educational agencies (LEAs) to reimburse the costs of 

educating students enrolled in public schools (both 

traditional and charter) and non-public elementary and 

secondary schools, who were displaced by a covered 

disaster or emergency.

IMM EDI AT E A ID TO R E STA RT 

SCHOOL OPER AT IONS 

The Immediate Aid to Restart School Operations 

(RESTART) program awards grants to eligible SEAs 

to assist eligible LEAs and non-public schools with 

expenses related to the restart of elementary schools 

and secondary schools in areas impacted by a covered 

disaster or emergency. Funds may be used to assist 

school administrators and personnel in restarting school 

operations, re-opening schools, and reenrolling students.

EMERGENCY ASSISTANCE TO 

INSTITUTIONS OF HIGHER EDUCATION

The Emergency Assistance to Institutions of Higher 

Education (EAI) program awards grants for emergency 

assistance to eligible Institutions of Higher Education 

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

declared. Funds awarded assist activities directly related to 

mitigating the effects of a covered disaster or emergency 

on students and institutions. To the extent possible, EAI 

prioritizes projects that support students who are homeless 

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

displacement related to a covered disaster or emergency; 

and IHEs that have sustained extensive damage by a 

covered disaster or emergency. 

In FY 2020, the Department used statistically valid and 

rigorous sampling and estimation methodologies to 

estimate the improper payment rates for the Pell Grant, 

Direct Loan, and EAI programs. Statistically valid and 

rigorous sampling and estimation methodologies were 

designed and implemented for the Emergency Impact 

Aid and RESTART programs in FY 2020. However, these 

methodologies did not yield the intended precision rates 

required for a rigorous estimate of the Emergency Impact 

Aid and RESTART programs. The methodologies used 

for each of these programs are described in detail on the 

Department’s improper payments website.

For detailed information on Pell Grant, Direct Loan, 

Emergency Impact Aid, RESTART and EAI improper 

payment estimates in FY 2020 and prior years, please visit 

https://paymentaccuracy.gov.

I. AC T IONS TA K EN TO 

A DDR E SS AU DITOR R ECOV ERY 

RECOMMENDATIONS

Agencies are required to conduct recovery audits for all 

programs and activities that expend more than $1 million 

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

recapture audits would not be cost effective for any of its 

loan and grant programs or for contracts. A comprehensive 

report on the cost effectiveness of the various recapture 

audit programs can be found in the Department’s FY 

2012 Report on the Department of Education’s 

Payment Recapture Audits.

The Department identifies and recovers improper payments 

through sources other than payment recapture audits 

and works with grantees and Title IV (FSA) program 

participants to resolve and recover amounts identified in 

compliance audits, OIG audits, and Department-conducted 

program reviews. The Department also analyzes the return 

of grant funds from recipients to determine if they are 

due to improper payments. When an improper payment 

is detected and deemed collectable, the Department 

establishes an account receivable and pursues collections. 

Recoveries are also made through grant program, payroll, 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 139

PAYMENT INTEGRITY | OTHER INFORMATION

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 

as when 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 2020, 

readers can visit https://paymentaccuracy.gov.

II. FRAUD REDUCTION REPORT

The Department continues to work with OMB to 

implement the Fraud Reduction and Data Analytics 

Act (FRDAA) of 2015 as incorporated by the Payment 

Integrity Information Act (PIIA) of 2019 and actively 

participates with OMB and other agencies in a 

government-wide workgroup that is collaborating on an 

implementation plan.

The Department has also taken steps to proactively 

identify the risk of fraud occurring across the agency. 

Through establishing an overarching Fraud Risk 

Governance Structure in FY 2020, the Department now 

has a means of promoting consistent organizational 

behavior by providing guidelines and assigning 

responsibility for fraud risk management, including 

the implementation of strong antifraud procedures 

and controls. Sources of guidance in implementing 

effective fraud risk management programs can be found 

in previous regulatory resources such as the PIIA and 

OMB A-123. In creating and adopting this Fraud Risk 

Governance Structure, the Department has identified 

several potential common fraud schemes and indicators. 

In doing so, internal and external fraud is differentiated 

to capture important distinctions in identifying and 

preventing both. Common fraud schemes include 

prospective vendors offering gifts or seemingly routine 

benefits during a competitive process, unbalanced bidding 

caused by employees providing their preferred bidder 

with information not disclosed to other vendors, and a 

vendor attempting to charge more than agreed to in the 

contract. OIG Investigative Services has identified several 

fraud indicators and further broken them down into the 

following categories:

1. K-12 Fraud—No separation of duties, missing school 

funds or property, inventory and financial records 

not reconciled, unreasonable costs, delayed or no 

reporting, unauthorized or related-party transactions, 

suspicious or unverifiable existence of vendors, grant 

award money runs out too quickly.

2. Postsecondary Education Fraud—Unexplained increase 

in wealth or lifestyle, unresolved or repeat audit 

findings and reluctance to provide information to 

auditors, nonexistent “students,” high employee 

turnover rate with low morale, lack of written policies 

and procedures, commonalities on Free Application 

for Federal Student Aid (FAFSA®) such as students 

sharing bank account numbers, home addresses, 

phone numbers or email addresses.

3. Public Corruption—Irregularities in contract awards 

or undue influence by people in decision making 

positions, suspicious bidding trends and patterns, 

conflicts of interest, transactions lacking business 

purpose, use of shell companies, bill and payment 

requests for services that may not have been provided.

4. Computer Crime—People requesting access to 

systems for which they do not need access, people 

accessing systems outside of normal working hours, 

excessive number of complaints about identity theft 

from customers, proprietary data belonging to an 

organization available unsecured on the internet.

This Fraud Risk Governance Structure also outlines the 

current efforts already underway at the Department to 

mitigate the risk of fraud, such as: 

 Required internal trainings covering fraud, waste, 

and abuse. 

 Multiple risk assessments by the OEDARM and FSA.

 Antifraud controls/tools that foster a culture of 

responsibility and awareness to mitigate fraud risk from 

penetrating the Department.

 FSA’s draft Fraud Risk Framework intended to outline 

FSA’s fraud risk management activities designed to 

combat fraud and preserve integrity in operations and 

programs, safeguard taxpayer monies, and minimize 

improper payments.
140 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | PAYMENT INTEGRITY

 OIG Audits.

 Data analytics further consisting of preliminary 

analytics (trend analysis, pattern recognition, 

outlier detection), FSA Analytics using machine 

learning techniques to detect and mitigate potential 

fraud in the student loan portfolio, and OIG 

Information Technology Audits and Computer Crime 

Investigations who proactively monitor ED data 

through sophisticated modeling for criminal activity 

and network intrusions.

 Fraud Awareness Initiatives including (but not 

limited to) fraud communication (such as through 

the EDSOC Cyber Threat and Intelligence Security 

Bulletin), OIG fraud awareness and communication, 

and FSA’s fraud awareness communications during 

International Fraud Awareness Week.

The Department recognizes the challenges that often 

surround fraud risk management and is taking action to 

address each challenge. These challenges include limited 

resources to conduct fraud risk management activities 

and difficulties in definitively separating fraud from other 

negative outcomes. The Department is exploring ways to 

refine or enhance its business processes to be in a better 

position to define, deter, detect, and act upon fraud. 

To build capacity and expertise for and to dedicate 

resources to fraud risk identification and mitigation, 

especially in the Title IV programs, FSA has created a 

compliance and fraud risk group and designated a fraud 

risk advisor within its Enterprise Risk Management 

Directorate (ERMD). During FY 2020, ERMD’s 

compliance and fraud risk group’s primary work on 

fraud included: 

1. Working to revise the charter and reconstitute the 

Enterprise Fraud Risk Advisory (EFRA) Group. The 

EFRA Group was established in FY 2019 to promote 

the integration of fraud risk management practices 

and processes into the daily operations of FSA to 

assist in achieving organizational strategic goals and 

objectives. Its primary responsibility is to provide 

oversight, planning, and coordination of enterprise 

fraud risk management activities.

2. Continuing to receive and process distance education 

fraud ring referrals from the Department’s OIG. 

3. Establishing a third-party debt relief (TPDR) fraud 

unit in FY 2020. The TPDR unit is working to 

centralize TPDR complaints within FSA, collaborate 

with the OIG and other consumer and law 

enforcement agencies to investigate complaints against 

potential TPDR companies, and identify mitigation 

strategies to address fraud risk related to 

TPDR companies. 

The Department, in its efforts to combat fraud, takes into 

account the Government Accountability Office (GAO) 

Framework for Managing Fraud Risks in Federal Programs 

(GAO Fraud Risk Management Framework). The 

Department commits to oversee fraud risk management 

activities as highlighted in the above-mentioned Fraud 

Risk Governance Structure. Additionally, the Department 

continues to assess the risks associated with fraud across 

the Department as incorporated by the multitude of 

risk assessments performed by program offices. Internal 

controls related to fraud are implemented according to the 

Internal Control Framework and are evaluated accordingly 

to ensure that specific control activities exist to mitigate 

assessed risks. The Department has catalogued internal 

controls related to fraud prevention and detection, which 

includes detective and preventive controls related to its 

grant and administrative payments.

The Department continues to evaluate the current fraud 

landscape and will adopt activities to improve fraud risk 

management. For example, to combat improper use of 

federal funding under the Every Student Succeeds Act

(ESSA), the Department requires that each recipient and 

subrecipient publicly display the contact information of 

the Department’s OIG hotline to facilitate the reporting 

of suspected improper use of ESSA funding. Furthermore, 

in accordance with 2 CFR 200 (Uniform Guidance), 

each recipient and subrecipient provides assurances 

of truthfulness and accuracy of the information they 

provide in applications and in response to monitoring and 

compliance reviews.
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 141

CIVIL MONETARY PENALTY ADJUSTMENT FOR INFLATION

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, as amended, requires agencies to make 

regular and consistent inflationary adjustments of civil monetary penalties to maintain their deterrent effect. To 

improve compliance with the Act, and in response to multiple audits and recommendations, agencies should report 

annually in the Other Information section the most recent inflationary adjustments to civil monetary penalties to ensure 

penalty adjustments are both timely and accurate.

Location for Penalty Update Details:

https://www.federalregister.gov/documents/2020/01/14/2020-00413/adjustment-of-civil-monetary-penalties-for-inflation

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) 2-01-19 1-14-20 $39,229

Failure to provide information regarding teacherpreparation programs20 USC 

1022d(a)(3) 2-01-19 1-14-20 $32,676

Violation of Title IV of the HEA 20 USC 1082(g) 2-01-19 1-14-20 $58,328

Violation of Title IV of the HEA 20 USC 

1094(c)(3)(B) 2-01-19 1-14-20 $58,328

Failure to disclose information to minor children and parents 20 USC 

1228c(c)(2)(E) 2-01-19 1-14-20 $1,722

Improper lobbying for government grants and contracts 31 USC 

1352(c)(1) 2-01-19 1-14-20 $20,489 to $204,892

False claims and statements 31 USC 3802(a)(1) 2-01-19 1-14-20 $11,665

Table 14
142 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

THE GRANTS OVERSIGHT AND NEW EFFICIENCY (GONE) ACT 

OF 2016 AND EDUCATION’S GRANT CLOSEOUT PROCESS 

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

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

of performance has exceeded two years.

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, 2020, the Department had 384 grants and cooperative 

agreements totaling approximately $62.8 million in various statuses of the closeout process. See Table 15 below.

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

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

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

grants to be closed in compliance without required reports being provided by the grantee. In addition, the OIG found that 

both the volume of expired grants and amount of undisbursed grant funds significantly increased between the date of initial 

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

GONE Act reporting is over. The memorandum is available at https://www2.ed.gov/about/offices/list/oig/auditreports/

fy2020/s19u0002.pdf.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Number of Grants/Cooperative 

Agreements with Zero Dollar 

Balances

48 - -

Number of Grants/Cooperative 

Agreements with Undisbursed 

Dollar Balances

336 - -

Total Amount of Undisbursed 

Balances $62,838,768 - -

Source: G5, grants management system linked to the Department’s general ledger system. Data is based on the performance end date of September 30, 2018.

Table 15