FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 141

Payment Integrity Information Act Reporting

All program outlays can be categorized into one of three 

payment type categories: proper payments, improper 

payments, and unknown payments. OMB Circular 

A-123, Appendix C, Requirements for Payment Integrity 

Improvement, defines an improper payment as a payment 

that was made in an incorrect amount under statutory, 

contractual, administrative, or other legally applicable 

requirements. The term improper payment includes any 

payment to an ineligible recipient; any payment for an 

ineligible good or service; any duplicate payment; any 

payment for a good or service not received, except for 

those payments where authorized by law; any payment 

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

not account for credit for applicable discounts. OMB 

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

payment as a payment that could either be proper or 

improper, but it cannot be determined whether the 

payment was proper or improper because of insufficient or 

lack of documentation.

The Department places a high value on maintaining the 

integrity of all types of payments made to ensure that the 

billions of dollars in federal funds it disburses annually 

reach intended recipients in the right amount and for 

the right purpose. The Department ensures payment 

integrity by establishing effective policies, business 

processes, systems, and controls over key payment 

activities, including those pertaining to payment data 

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

reporting. The number and dollar value of improper 

and unknown payments are key indicators of payment 

integrity. Accordingly, the Department maintains a robust 

internal control framework that includes internal controls 

designed to help prevent, detect, and recover improper 

and unknown payments. In designing controls, the 

Department attempts to strike the right balance between 

making timely and accurate payments and ensuring 

that controls put in place are not too costly or overly 

burdensome and thereby deter intended beneficiaries from 

obtaining funds they are entitled to receive. Additionally, 

the Department must rely heavily on controls established 

by external entities that receive Department payments, 

including federal, state, and private organizations and 

institutions, because they further distribute funds they 

receive from the Department to subordinate organizations 

and individuals. Due to these third-party controls being 

outside of the Department’s operational management, 

they present a higher risk to the Department, as evidenced 

by its root cause analysis. When control deficiencies are 

detected, either within the Department or at external 

entities, the Department seeks to identify their root causes, 

develop corrective action plans, and track corrective 

actions through to completion.

To further promote payment integrity, the Department 

continues to develop its Payment Integrity Monitoring 

Application (PIMA), which detects anomalies in grants 

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

investigation by the Department’s grants program officials 

to validate improper payments and determine root causes. 

Additionally, the Department continues to develop its 

internal control framework to address gaps, strengthen 

internal control processes, and align assessments with 

enterprise risk management. Both efforts reflect the 

Department’s recognition of the critical importance that 

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

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

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

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

Federal Direct Loan programs continued to be susceptible 

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

the Department continued monitoring outlays of grant 

programs receiving funding for disaster relief. According 

to OMB Memorandum M-18-14, Implementation of 

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

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

deemed susceptible to significant improper payments. 

The Department identified three programs that met 

this criterion: the Temporary Emergency Impact Aid 

for Displaced Students (Emergency Impact Aid), 

Immediate Aid to Restart School Operations (Restart) 

and the Emergency Assistance to Institutions of Higher 

Education (EAI) program. Additionally, at the conclusion 
142 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | PAYMENT INTEGRITY INFORMATION ACT REPORTING

of FY 2020’s improper payment risk assessment, the 

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

susceptible to significant improper payments. 

The Department continues to place additional emphasis 

to ensure payment integrity and minimize improper 

and unknown payments in these important programs as 

required by OMB guidance. Readers can obtain a detailed 

breakdown of information on improper and unknown 

payment estimates, root causes, and corrective actions for 

the programs at https://paymentaccuracy.gov.

P E L L G R A N T 

The Pell Grant Program, authorized under Title IV 

of the Higher Education Act of 1965 (HEA), provides 

need-based grants to low-income undergraduate and 

certain post-baccalaureate students to promote access to 

postsecondary education. 

D I R EC T LO A N 

The Direct Loan Program, added to HEA in 1993 by 

the Student Loan Reform Act of 1993, authorizes the 

Department to make loans through participating schools 

to eligible undergraduate and graduate students and 

their parents.

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

FOR DISPLACED STUDENTS

The Temporary Emergency Impact Aid for Displaced 

Students (Emergency Impact Aid) program awards 

emergency impact aid funding to state educational 

agencies (SEA). SEAs provide subgrants to local 

educational agencies (LEA) to reimburse the costs of 

educating students enrolled in public schools (both 

traditional and charter) and nonpublic elementary and 

secondary schools, who were displaced by a covered 

disaster or emergency.

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

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

The Immediate Aid to Restart School Operations (Restart) 

program awards grants to eligible SEAs to assist eligible 

LEAs and nonpublic schools with expenses related to the 

restart of elementary schools and secondary schools in 

areas impacted by a covered disaster or emergency. Funds 

may be used to assist school administrators and personnel 

in restarting school operations, reopening schools, and 

reenrolling students.

EMERGENCY ASSISTANCE TO INSTITUTIONS OF 

HIGHER EDUCATION

The Emergency Assistance to Institutions of Higher 

Education (EAI) program awards grants for emergency 

assistance to eligible Institutions of Higher Education 

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

declared. Funds awarded assist activities directly related to 

mitigating the effects of a covered disaster or emergency 

on students and institutions. To the extent possible, EAI 

prioritizes projects that support students who are homeless 

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

displacement related to a covered disaster or emergency; 

and IHEs that have sustained extensive damage by a 

covered disaster or emergency. 

TITLE I, PART A

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

Education Act, as amended by the Every Student Succeeds 

Act (ESEA) provides financial assistance to LEAs and 

schools with high numbers or high percentages of children 

from low-income families to help ensure that all children 

meet challenging state academic standards. Federal funds 

are currently allocated through four statutory formulas 

that are based primarily on census poverty estimates and 

the cost of education in each state.

In FY 2021, the Department used statistically valid 

sampling and estimation methodologies to estimate the 

improper payment rates for the Pell Grant, Direct Loan, 

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

The methodologies used for each of these programs 

are described in detail on the Department’s improper 

payments website.

For detailed information on Pell Grant, Direct Loan, 

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

payment estimates in FY 2021 and prior years, please visit 

https://paymentaccuracy.gov.

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

RECOVERY RECOMMENDATIONS

Agencies are required to conduct recovery audits for all 

programs and activities that expend more than $1 million 

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

recapture audits would not be cost effective for any of its 

loan and grant programs or for contracts. A comprehensive 
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PAYMENT INTEGRITY INFORMATION ACT REPORTING | OTHER INFORMATION

report on the cost effectiveness of the various recapture 

audit programs can be found in the Department’s 

FY 2012 Report on the Department of Education’s 

Payment Recapture Audits.

The Department identifies and recovers improper 

payments through sources other than payment recapture 

audits and works with grantees and Title IV (FSA) 

program participants to resolve and recover amounts 

identified in compliance audits, OIG audits, and 

Department-conducted program reviews. The Department 

also analyzes the return of grant funds from recipients to 

determine if they are due to improper payments. When 

an improper payment is detected and deemed collectable, 

the Department establishes an account receivable and 

pursues collection. Recoveries are also made through 

grant program, payroll, and other offsets. Recipients of 

Department funds can appeal management’s decisions 

regarding funds to be returned to the Department 

or they may go bankrupt before the Department can 

collect, thereby delaying or decreasing the amounts 

the Department is able to collect. Additionally, the 

Department has wide discretion to decide not to collect 

improper payments from grantees in cases where it 

determines that pursuing collections would cause more 

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

not all identified improper payments will ultimately be 

collected and collections will not necessarily be made in 

the same year the improper payments were identified. 

The Department continues to work to improve its 

methods to identify, collect, and report on improper 

payment collections. For detailed information on 

identified and recovered improper payments in FY 2021, 

readers can visit https://paymentaccuracy.gov.