GAO-02-1030R Education Penalty Adjustments

United States General Accounting Office

Washington, DC 20548

August 26, 2002

The Honorable Roderick R. Paige

The Secretary of Education

Subject: The Department of Education’s Compliance with the

 Inflation Adjustment Act

Dear Mr. Secretary:

Earlier this year, we initiated a governmentwide review of the implementation of the

Federal Civil Penalties Inflation Adjustment Act of 1990, as amended (Inflation

Adjustment Act).1

 The Inflation Adjustment Act required each federal agency to issue

a regulation adjusting its covered maximum and minimum civil monetary penalties

for inflation by October 23, 1996, and requires them to make necessary adjustments at

least once every 4 years thereafter. During our review, the Department of

Education’s (Education) Office of General Counsel indicated that at least eight of the

agency’s civil penalties are covered by the act, but the agency had not adjusted any of

them for inflation. This report is intended to bring this matter to your attention and

to recommend corrective action.

The Department of Education Identified at Least Eight Civil

Penalties That Are Covered by the Inflation Adjustment Act

Section 3 of the Inflation Adjustment Act defines a covered civil penalty as any

“penalty, fine, or other sanction that ... is for a specific monetary amount as provided

by Federal law” or “has a maximum amount provided for by Federal law,” and “is

assessed or enforced by an agency pursuant to Federal law” and “is assessed or

enforced pursuant to an administrative proceeding or a civil action in the Federal

courts.” Education’s Office of General Counsel provided us with a list of civil

penalties that it considered covered by the Inflation Adjustment Act. Table 1 lists

those penalties as well as their maximum penalty amounts, assessment methods, and

the years that the penalties were last set or adjusted.

 1

The Inflation Adjustment Act is codified at 28 U.S.C. 2461 note. The 1990 act was amended in 1996 by

the Debt Collection Improvement Act, which added the requirement for agencies to adjust their civil

penalties by regulation (Pub. L. 104-134, Sec. 31001, 110 Stat. 1321-373).
Page 2 GAO-02-1030R Education Penalty Adjustments

Table 1: Department of Education’s Civil Penalties Covered by the Inflation

Adjustment Act

U.S.C.

citation Description of violation

Maximum

penalty

amount

Assessment

method

Year

penalty

was last

set or

adjusted

20 U.S.C.

1015(c)(5)

Failure by an institution of

higher education to provide

information on the cost of

higher education to the

Commissioner of

Education Statistics.

$25,000 For each failure. 1998

20 U.S.C.

1027(f)(3)

Failure by an institution of

higher education to provide

information to the state and

the public regarding its

teacher-preparation

programs in a timely or

accurate manner.

$25,000 For each failure. 1998

20 U.S.C.

1082(g)

Violations by lenders and

guaranty agencies of Title

IV-B of the Higher

Education Act, which

authorizes the Federal

Family Education Loan

Program.

$25,000 For each violation,

failure, or

misrepresentation.

1986

20 U.S.C.

1094(c)(3)(B)

Violations of Title IV of the

Higher Education Act,

which authorizes various

programs of student

financial assistance.

$25,000 For each violation

or

misrepresentation.

1986

31 U.S.C.

1352(c)(1)

Violations regarding the

limitation on the use of

appropriated funds to

influence certain federal

contracting and financial

transactions.

$100,000a For each

expenditure.

1989

31 U.S.C.

1352

(c)(2)(A)

Violations regarding the

failure to file or to amend

declarations relating to

lobbying activities.

$100,000a For each failure to

file or amend a

required

declaration.

1989

31 U.S.C.

3802 (a)(1)

Violation of the Program

Fraud Civil Remedies Act.

$5,000 For each false

claim.

1986

31 U.S.C.

3802 (a)(2)

Violation of the Program

Fraud Civil Remedies Act.

$5,000 For each false

written statement.

1986

a

The statutory minimum penalty for these violations is $10,000.

Source: Department of Education’s Office of General Counsel.
Page 3 GAO-02-1030R Education Penalty Adjustments

The Department of Education Has Not Adjusted

Its Covered Civil Penalties for Inflation

Under the Inflation Adjustment Act, Education (like other covered federal agencies)

was required to publish a regulation by October 23, 1996, adjusting its maximum civil

penalties for inflation. The amount of this adjustment was to be based on changes in

the Consumer Price Index (CPI) from June of the calendar year in which Education’s

penalties were last set or adjusted through June of the year prior to the adjustment

(i.e., June 1995 for adjustments made in October 1996). However, the statute limited

the first adjustments of an agency’s penalties to 10 percent of the penalty amounts.

Six of the penalties in table 1 were enacted before 1996, and the CPI had increased by

more than 10 percent since those six penalties were last set or adjusted. Therefore,

Education should have published a regulation in the Federal Register by October 23,

1996, increasing those six penalties by 10 percent.2

The Inflation Adjustment Act also required Education to examine its civil penalties by

October 23, 2000, and, if necessary, make additional inflation adjustments. The

calendar year 2000 adjustments were to be based on changes in the CPI from June of

the year in which the penalties were last adjusted (e.g., June 1996 for the six penalties

that should have been adjusted by 10 percent) through June of the year prior to the

adjustment (June 1999). If Education had adjusted six of its penalties in 1996, the

department could have increased those penalties again in 2000.

However, our review of the Federal Register for calendar years 1996 through 2001 did

not reveal any Education regulations that increased the agency’s civil penalties for

inflation. Education’s Deputy General Counsel for Departmental and Legislative

Service confirmed that Education had not published any penalty adjustment

regulations pursuant to the Inflation Adjustment Act.

Recommendation for Executive Action

We recommend that the Secretary of Education initiate a regulatory action to adjust

for inflation all of the agency’s civil penalties that are covered by the Inflation

Adjustment Act.

Agency Comments and Our Evaluation

On August 15, 2002, we provided a draft of this report to the Secretary of Education

for his review and comment. On August 21, 2002, the Department of Education’s

General Counsel provided GAO with written comments on the draft report, which are

reproduced in the enclosure. The General Counsel said that Education had benefited

greatly from the information we have provided on this issue and that it will soon

initiate the appropriate regulatory process to adjust for inflation all of its civil

penalties that are covered by the Inflation Adjustment Act. The General Counsel also

indicated that the time to adjust two 1998 penalties has not expired, and that our

report should indicate that the Department has not failed to comply with the Inflation

Adjustment Act concerning these two penalties. We deleted the sentences that

 2

As of August 2002, not enough inflation had occurred to allow Education to adjust its two penalties

that were established in 1998.
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referred to these penalties and added a footnote to the report indicating that not

enough inflation had occurred to permit Education to adjust those penalties.

- - - - -

We are sending copies of this report to the appropriate congressional committees,

and it will be available at no charge on GAO’s website at http://www.gao.gov. If you

or your staff have any questions on the matters discussed in this letter, you may

contact Curtis Copeland or me at (202) 512-6806. Major contributors to this report

include John Tavares and Oliver Walker.

Sincerely yours,

Victor S. Rezendes

Managing Director

Strategic Issues

Enclosure
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Comments from the Department of Education

(450132)