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. ***