    The Department of Education's Compliance with the Inflation
    Adjustment Act (26-AUG-02, GAO-02-1030R).

    Earlier this year, GAO initiated a governmentwide review of the
    implementation of the Federal Civil Penalties Inflation
    Adjustment Act of 1990. 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 the review, the
    Department of Education's Office of the General Counsel indicated
    that at least eight of the agency's civil penalties are covered
    by that act, but the agency had not yet adjusted any of them for
    inflation.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-02-1030R
        ACCNO:   A04716
      TITLE:     The Department of Education's Compliance with the
    Inflation Adjustment Act
         DATE:   08/26/2002
      SUBJECT:   Fines (penalties)
    	     Federal law
    	     Inflation
    	     Noncompliance
    	     Consumer Price Index

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    GAO-02-1030R

       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).

       GAO- 02- 1030R Education Penalty Adjustments Page 2

       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.

       $100,000 a 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.

       $100,000 a 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.

       GAO- 02- 1030R Education Penalty Adjustments Page 3

       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.

       GAO- 02- 1030R Education Penalty Adjustments Page 4 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

       GAO- 02- 1030R Education Penalty Adjustments Page 5

       Comments from the Department of Education

       (450132)
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