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)
*** End of document. ***