Department of Education: Status of Actions to Improve the Management of
Student Financial Aid (Letter Report, 07/12/96, GAO/HEHS-96-143).

Pursuant to a congressional request, GAO reviewed the Department of
Education's student financial aid programs, focusing on the: (1) status
of Education actions in response to numerous recommendations concerning
the administration of student financial aid programs; and (2) reasons
Education gave for not acting on some recommendations.

GAO found that: (1) Education has made progress in initiating actions to
address some recommendations; (2) some of Education's corrective actions
have resulted in major program changes; (3) Education will not address
19 recommendations because it believes previous corrective actions
address these recommendations; and (4) some corrective actions do not
address Education's program management problems.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-143
     TITLE:  Department of Education: Status of Actions to Improve the 
             Management of Student Financial Aid
      DATE:  07/12/96
   SUBJECT:  Government guaranteed loans
             Student loans
             Delinquent loans
             Higher education
             Financial management systems
             Student aid programs
             Program abuses
             Loan defaults
             Internal controls
             Data integrity
IDENTIFIER:  Federal Family Education Loan Program
             Dept. of Education Stafford Student Loan Program
             Guaranteed Student Loan Program
             Pell Grant
             Dept. of Education National Student Loan Data System
             Dept. of Education Student Aid Application System
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Permanent Subcommittee on
Investigations, Committee on Governmental Affairs, U.S.  Senate

July 1996

DEPARTMENT OF EDUCATION - STATUS
OF ACTIONS TO IMPROVE THE
MANAGEMENT OF STUDENT FINANCIAL
AID

GAO/HEHS-96-143

Status of Actions

(104833)


Abbreviations
=============================================================== ABBREV

  ACD - audit clearance document
  AFMS - Accounting and Financial Management Service
  ARB - Audit Resolution Branch
  CED - Compliance and Enforcement Division
  DIIG - Data Integrity Insurance Group
  DLSS - Direct Loan Servicing System
  EDCAPS - Education Central Automated Processing System
  ESL - English as a Second Language
  FARS - Financial Accounting and Reporting System
  FASAB - Federal Accounting Standards Advisory Board
  FCC - federal capital contribution
  FDSLP - Federal Direct Student Loan Program
  FFEL - Federal Family Education Loan
  FFELP - Federal Family Education Loan Program
  FMS - Financial Management Service
  FOS - Field Operations Service
  FPRDL - Final Program Review Determination Letter
  FSMB - Federation of State Medical Boards
  GLOS - Guaranty Agency and Lender Oversight Service
  GLRB - Guarantor and Lender Review Branch
  GPAS - General Performance Appraisal System
  GSLB - Guaranteed Student Loan Branch
  HEA - Higher Education Act
  IDS - Institutional Data System
  IMD - Institutional Monitoring Division
  IPA - Independent Public Accountant
  IPOS - Institutional Participation and Oversight Service
  IRB - Institutional Review Branch
  IRM - information resources management
  LSARB - Lender and State Agency Review Branch
  NCFMEA - National Committee on Foreign Medical Education and
     Accreditation
  NSLDS - National Student Loan Data System
  OGC - Office of General Counsel
  OIG - Office of the Inspector General
  OMB - Office of Management and Budget
  OPE - Office of Postsecondary Education
  PAS - primary accounting system
  PDL - Program Determination Letter
  PEPS - Postsecondary Education Participants System
  PSI - Permanent Subcommittee on Investigations
  PSS - Program Systems Service
  ROD - Regional Operations Division
  SFAP - Student Financial Aid Programs
  SPRE - State Postsecondary Review Entity
  SSA - Social Security Administration
  TGA - Transitional Guaranty Agency
  VA - Department of Veterans Affairs

Letter
=============================================================== LETTER


B-271028

July 12, 1996

The Honorable Sam Nunn
Ranking Minority Member
Permanent Subcommittee on Investigations
Committee on Governmental Affairs
United States Senate

Dear Senator Nunn: 

Each year, through the Department of Education's student financial
aid programs, students have access to billions of dollars in loans
and grants for postsecondary education.  As reported by the
Department, total student financial aid under title IV of the Higher
Education Act of 1965 (HEA), as amended, for students during academic
year 1994-95 was $32.7 billion.  The largest source of this aid (70
percent) was the Federal Family Education Loan Program (FFELP),\1
which provided 6.2 million loans totaling almost $23 billion.  The
second largest source was the Federal Pell Grant Program, which
provided 3.7 million grants totaling $5.6 billion. 

Concerns have been expressed over the years about fraud and abuse in
these student aid programs, especially FFELP and the Pell Grant
Program.  Concerns have also been expressed about the inadequacy of
the Department's procedures for gatekeeping--determining which
schools can participate in these programs--and program review. 

In response to these concerns, in 1990 the Senate's Permanent
Subcommittee on Investigations (PSI) held hearings and, in 1991,
issued a report, which included 29 recommendations to the
Department.\2 In 1993 and 1995, PSI held related hearings concerning
proprietary schools' (for-profit trade schools) alleged fraud and
abuse under the Pell Grant Program.  Between April 1991 and July
1995, the Department's Office of the Inspector General (OIG) also
issued reports on topics such as the large number of FFELP defaults
and discrepancies in schools' reporting on their use of Pell grant
funds.  In these reports, OIG made 135 recommendations to the
Department.  During the same period, we reported on problems with the
Department's administration of student financial aid programs and
made 41 recommendations. 

In total, PSI, OIG, and we made 205 recommendations to the
Department.  In this report, we are responding to your request to
determine (1) the status of the Department's actions in response to
these recommendations, including whether the Department's actions
address the recommendations, and (2) the reasons the Department gave
for not acting on some recommendations. 

To respond to your request, we examined relevant Department records
and interviewed PSI and OIG staff and responsible Department
officials.  For each PSI and OIG recommendation, we asked the PSI or
OIG staff who did the investigative or audit work for the status of
the corrective action, including whether the action addresses the
recommendation.\3 To determine the status of our recommendations, we
reviewed Department records and talked to responsible Department
officials.  We also obtained the reasons for the Department's
inaction on recommendations from responsible Department officials and
our review of Department records. 

We reviewed the Department's actions through April 1996 and conducted
our review from October 1995 to June 1996 in accordance with
generally accepted government auditing standards.  See appendix I for
details on our scope and methodology. 


--------------------
\1 FFELP was formerly called the Guaranteed and Stafford Student Loan
Programs. 

\2 Abuses in Federal Student Aid Programs, U.S.  Senate, PSI,
Committee on Governmental Affairs, S.  Report 102-58 (Washington,
D.C.:  1991). 

\3 The phrase "action addresses the recommendation" means that the
action has the potential to remedy the reported problem.  Neither
PSI, OIG, nor we determined whether the action actually solved the
problem. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Department has completed actions or has actions in progress or
planned for 186 (91 percent) of the 205 recommendations made to
improve its management of federal student financial aid.  Most of
these actions have the potential to remedy problems underlying the
recommendations.  For example, in addressing recommendations to
improve the accuracy and completeness of student aid data, the
Department began working more closely with guaranty agencies\4 to (1)
understand and resolve some of the data errors and (2) implement
better edit checks in its newly developed National Student Loan Data
System (NSLDS). 

The availability of more accurate data should help ensure that the
Department has the most current data for monitoring students' loan
indebtedness, guaranteeing compliance with federal requirements, and
managing student financial aid. 

Some of the Department's actions, for about 10 percent of the 186
recommendations, however, generally will not remedy the problems,
according to staff of the entity that made the recommendations.  For
example, PSI recommended that the Department revise limits on the
amount of federal student aid available for students attending
proprietary schools.  PSI found that proprietary schools often
receive federal funds for inflated and exorbitant tuition, when the
same, or better, education and training was available elsewhere at
much lower cost.  Although the Department has not implemented this
recommendation, it plans to consider it when developing its
legislative proposal for reauthorizing HEA in 1997. 

For the remaining 19 (9 percent) of the 205 recommendations, the
Department took no actions.  According to Department officials, the
principal reason the Department did not act was that it disagreed
with the recommendations.  Other reasons, given by Department
officials, include the Department's belief that (1) previous actions
addressed the recommendations and (2) it did not have the authority
to implement the recommendations.  For two recommendations, the
Department provided no reason. 

The following illustrates an instance in which the Department
disagreed with a recommendation.  OIG recommended that the Department
collect and compile schools' performance data, such as job placement
rates, from accrediting agencies.\5 The Department could use this
information to help determine the overall success of title IV-funded
job training.  The Department disagreed, (1) saying this would impose
a considerable burden on accrediting agencies and (2) citing
limitations on the methodology for calculating these measures. 


--------------------
\4 Guaranty agencies are agencies that serve as intermediaries
between the Department and lenders, insure the loans made by lenders
to students, and ensure that lenders and schools meet FFELP
requirements. 

\5 Managing for Results:  Review of Performance-Based Systems at
Selected Accrediting Agencies, Department of Education, ACN-06-30004
(Washington, D.C.:  May 8, 1995). 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Department administers programs for student financial aid under
title IV of HEA.  In prior years, PSI, OIG, and we found that the
Department had historically mismanaged and poorly overseen these
programs.  In reports, PSI, OIG, and we identified many problems that
varied in their significance.  Many of these reports highlighted
areas where the Department was not properly managing and
administering its student aid programs.  These problems were
attributed to inadequate planning, inaccurate loan data, and weak
internal controls. 

We also identified FFELP as 1 of 17 federal programs that we
considered to be "high risk" because it was especially vulnerable to
waste, fraud, abuse, and mismanagement.  Given the number of
defaulted student loans, we concluded that the Department did not
fully succeed in protecting the financial interest of the federal
government and U.S.  taxpayers.\6 In our 1995 high-risk series, we
expanded the "high-risk" designation to include all student financial
aid programs under title IV of HEA.\7


--------------------
\6 High-Risk Series:  Guaranteed Student Loans (GAO/HR-93-2, Dec. 
1992). 

\7 High-Risk Series:  Student Financial Aid (GAO/HR-95-10, Feb. 
1995). 


   DEPARTMENT ACTIONS GENERALLY
   ADDRESSED MOST RECOMMENDATIONS
------------------------------------------------------------ Letter :3

In general, the Department has advanced significantly in initiating
actions (completed, in progress, or planned) that addressed
recommendations (see table 1). 



                          Table 1
          
          Status of Actions on 205 Recommendations
          Made to the Department, April 1991-July
                            1995
                     (as of April 1996)


          Complete        In                None
Source           d  progress   Planned     taken     Total
--------  --------  --------  --------  --------  --------
PSI             14         7         3         5        29
OIG             85        31         7        12       135
GAO             22        15         2         2        41
==========================================================
Total          121        53        12        19       205
----------------------------------------------------------
See appendix II for a list of PSI recommendations, appendix III for a
list of OIG recommendations, and appendix IV for our recommendations. 
The status of the action appears for each recommendation. 

The Department's actions have addressed most of the recommendations. 
According to the sources that made the recommendations--PSI, OIG, and
us--of the 186 for which the Department has initiated actions, the
actions have generally addressed 159 recommendations but have not
addressed 19; for the remaining 8, PSI could not determine whether
the actions addressed its recommendations because of the recency of
the actions (see table 2). 



                          Table 2
          
          Department Actions Addressed 186 of 205
                      Recommendations


                         Generally
             Generally      do not   Could not
Source         address     address   determine       Total
----------  ----------  ----------  ----------  ----------
PSI                 14           2           8          24
OIG                112          11           0         123
GAO                 33           6           0          39
==========================================================
Total              159          19           8         186
----------------------------------------------------------

      SOME CORRECTIVE ACTIONS
      RESULTED IN MAJOR
      IMPROVEMENTS
---------------------------------------------------------- Letter :3.1

Some of the 159 actions that addressed recommendations have resulted
in major changes, such as (1) strengthening gatekeeping
procedures--for example, improving the eligibility and certification
process--to ensure that the Department does not allow unscrupulous
schools to participate in student aid programs; (2) implementing
initiatives for better financial management, such as issuing an audit
guide requiring lenders participating in FFELP to have an annual
compliance audit by a nonfederal organization to better ensure the
financial integrity of FFELP; and (3) beginning to implement NSLDS. 

Although an assessment of whether changes resolved the problems
underlying the recommendations is beyond the scope of this report,
implementation of NSLDS illustrates actions that have yielded some
improvements.  For example, to address recommendations concerning
NSLDS data, the Department has formed the NSLDS Data Integrity
Insurance Group (DIIG).  DIIG is charged with (1) identifying data
anomalies, inconsistencies, and inaccuracies in NSLDS; (2) correcting
and preventing data problems; and (3) working toward ensuring the
accuracy, completeness, and timeliness of NSLDS data.  As of October
1995, DIIG identified (1) several data inaccuracies that resulted in
additional edits being added to NSLDS and (2) many omissions and
inaccuracies in data supplied by schools to the Department's systems. 
Eliminating these data problems is a top DIIG priority. 

The Department also formed an NSLDS project team tasked with
reviewing alleged defaulters receiving subsequent loans.  As of May
1996, for award year 1995-96, the project team, using data from NSLDS
and the Department's student aid application system, identified
100,376 student aid applicants who should not have received federal
student loans.  The system showed that these applicants had
previously defaulted on a loan.\8 If they did receive subsequent
loans, these borrowers could have received over $280 million in
overpayments.  This estimate is based on the Department's records,
which show the average loan amount is about $2,800. 

These checks and data analyses may screen out obvious errors and
inconsistencies; however, they do not ensure that the remaining data
are valid and accurate, which the usefulness of NSLDS data depends
on.  As a result, we, as well as OIG, believe that the Department has
not adequately tested the accuracy and validity of loan data in
NSLDS.  The Department is currently working with a contractor to
identify and verify critical data items in NSLDS. 


--------------------
\8 Federal law and regulations state that students who have defaulted
on a loan may not receive another loan (unless they arrange to repay
their defaulted loans). 


      SOME CORRECTIVE ACTIONS WILL
      NOT REMEDY PROBLEMS
---------------------------------------------------------- Letter :3.2

According to PSI, OIG, and our staff, 19 corrective actions generally
did not address the recommendations, possibly allowing problems
relating to important matters to continue.  For example, PSI
recommended that the Department revise limits on the amount of
federal student aid available for students attending proprietary
schools.  PSI found that proprietary schools often received federal
funds for overpriced tuition, when the same, or better, education and
training was available and less costly elsewhere.  PSI reported that
in one case, a proprietary school student paid up to 38 times the
tuition that other postsecondary schools charged, such as a local
community college, for the same training.  Although the Department
has not yet implemented this recommendation, it plans to consider it
when developing its legislative proposal for reauthorizing HEA in
1997. 

In some instances, the Department's actions did not address OIG
recommendations.  For example, OIG determined that the Department has
not addressed an important recommendation on the lender review
process.  In January 1994, as part of a review of guaranty agency and
lender oversight procedures, OIG concluded that the lender review
process needed many improvements.  This included better targeting of
agencies and lenders for review, which should minimize the financial
risk associated with not selecting larger lenders for review.\9
Department regulations require guaranty agencies to biennially review
the 10 largest lenders or those with loans equal to 2 percent of the
agency's portfolio.  The OIG recommended that the Department's
Guaranty Agency and Lender Oversight Service (GLOS) ensure that
guaranty agencies comply with this requirement as an element of
overall program fiscal and managerial control. 

The Department said it issued additional guidance to guaranty
agencies for meeting the requirement.  The Department also stated
that it allows them to substitute another lender for any 1 of its
largest 10 or 1 with 2 percent of loans.  These substitutions were
granted in certain circumstances, such as to include a lender with a
significant change in its loan volume or default rate.  The
Department did not indicate what actions GLOS would take to ensure
reviews of the largest 10, or top 2 percent of, lenders that are not
reviewed by guaranty agencies because of substitutions. 


--------------------
\9 Review of the Performance of the Guaranteed Student Loan Branches
With Student Financial Assistance Programs, Department of Education,
ACN-04-20075 (Washington, D.C.:  Jan.  28, 1994). 


   THE DEPARTMENT DID NOT ACT ON
   SOME RECOMMENDATIONS BECAUSE IT
   BELIEVED NO ACTION WAS NEEDED
------------------------------------------------------------ Letter :4

The Department did not act on 19 of the 205 recommendations.  The
reasons the Department gave for not acting appear in table 3.  For 14
of the 19 recommendations, the Department believed no actions were
needed because it (1) disagreed with the recommendation or (2)
believed a previous action addressed the recommendation. 



                          Table 3
          
          Reasons the Department Provided for Not
                 Acting on Recommendations

Reasons                                             Number
------------------------------------------------  --------
Disagreed with the recommendation                        9
Believed previous action addressed the                   5
 recommendation
Believed it lacked authority to implement the            2
 recommendation
Did not know the recommendation existed                  1
Provided no reason                                       2
==========================================================
Total                                                   19
----------------------------------------------------------
The following are examples of some significant recommendations for
which the Department took no actions: 

  -- The Department said it disagreed with our recommendation that it
     study the feasibility of requiring guaranty agencies to
     standardize their FFELP loan accounting systems.\10 We reported
     that although each guaranty agency operates with the same basic
     program objectives and criteria, at least 4 of 10 we
     judgmentally selected for review were independently developing
     new loan information systems or upgrading their current systems. 
     Such independent development efforts may not be an efficient use
     of the Department's funds and may impair its ability to
     effectively oversee guaranty agency activity. 

The Department, in disagreeing, said it believes that (1) requiring
guaranty agencies to use a standard loan accounting system would not
be feasible because some agencies are within state government units
and must follow state accounting procedures and (2) implementing the
recommendation would not be practical because of the large number of
guaranty agencies.  It did say that if the number of guaranty
agencies were to be reduced to a more manageable level, it would
pursue implementing standardized accounting systems.  We still
believe that a standardized accounting system would improve the
Department's ability to oversee guaranty agency activity. 

  -- The Department said it disagreed with an OIG recommendation that
     it collect and compile schools' performance data, such as job
     placement rates, from accrediting agencies.  This information
     could be used by the Department to help determine the overall
     success of title IV-funded job training.  The Department
     disagreed, (1) saying this would impose a considerable burden on
     accrediting agencies and (2) citing limitations on the
     methodology for calculating these measures. 

  -- The Department said it believed previous action addressed a PSI
     recommendation that the Department better coordinate its
     gatekeeping activities with other government agencies.  PSI
     reported, for example, that the Department had failed to
     systematically coordinate with the Department of Veterans
     Affairs (VA), even though VA has its own student aid program. 
     Because the Department and VA inadequately coordinated their
     compliance activities, each Department was generally unaware of
     the other's initiation of an adverse action taken against a
     school, which could contribute to duplicative compliance
     activities as well as increased costs.  PSI recommended that the
     Department seek the assistance of VA and the Department of Labor
     (Labor) in sharing mutually useful information, such as having
     the agencies alert each other when an adverse action is taken. 

The Department said that (1) in 1995, it had discussions with Labor
on coordination efforts in which it determined that the structure of
each Department's respective programs was sufficiently different that
comparisons were not helpful; and (2) in the mid-1980s, it shared
information about adverse actions with VA; however, this effort was
discontinued in the late 1980s because it was not producing results. 
The Institutional Participation and Oversight Service expects to
contact VA by December 1996 to determine whether it would be useful
to reinstate a modified information exchange that might prove to be
more beneficial.  As of April 1996, the Department had not developed
initiatives to improve its coordination with VA and Labor. 


--------------------
\10 Financial Audit:  Guaranteed Student Loan Program's Internal
Controls and Structure Need Improvement (GAO/AIMD-93-20, Mar.  16,
1993). 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :5

On June 24, 1996, the Department of Education provided us written
comments on a draft of our report.  (See app.  V.) The Department
agreed with our assessment of its actions to address 205
recommendations to improve the management of student financial aid
programs (SFAP) made by PSI, OIG, and us.  In its response, the
Department identified improvements in key measurements that it
attributed to changes made in managing SFAP as well as some specific
accomplishments and ongoing initiatives it is taking regarding
gatekeeping. 

Regarding the issues identified in the report in which the Department
disagreed with a recommendation, the Department believes that its
justifications are supportable and fairly represented.  The
Department also said that it was impossible to make some of the
recommended changes without changes in legislation, and several
legislative actions that might address some of the open issues in the
report are pending in the legislative process.  The Department
expects to continue to address open recommendations, as appropriate,
during the next reauthorization of HEA. 

The Department's staff also provided a number of technical comments
and suggestions, which we incorporated as appropriate.  In some of
these comments, the Department highlighted actions it took after our
April 1996 cutoff date.  Time did not permit us to update actions
taken after April 1996, in part, because PSI and OIG did not have an
opportunity to evaluate them. 

We are sending copies of this report to the Secretary of Education,
appropriate congressional committees, and other interested parties. 
We also will make copies available to others on request. 

If you have any questions about this report, please contact me or
Joseph J.  Eglin, Jr., Assistant Director, at (202) 512-7014.  This
report was prepared by Paula N.  Denman, Evaluator-in-Charge.  Other
contributors are listed in appendix VI. 

Sincerely yours,

Carlotta C.  Joyner
Director, Education and
 Employment Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To achieve our objectives, we reviewed Senate Permanent Subcommittee
on Investigations, Office of the Inspector General (Department of
Education), and our prior reports, testimonies, and studies to
identify past recommendations.  We reviewed reports issued between
April 1991 and July 1995 that focused on issues relating to fraud,
abuse, mismanagement, and high-risk activities in the Department's
implementation of federal student financial aid programs. 

To determine the status of the Department's actions in response to
PSI, OIG, and our recommendations, we (1) interviewed officials
responsible for carrying out and overseeing the implementation of the
recommendations and (2) reviewed the Department's Corrective Action
Plans and supporting documentation and our documentation related to
following up on our recommendations. 

To determine the extent to which the Department's actions addressed
the recommendations, we interviewed PSI, OIG, and our staff who
developed the recommendations.  For those instances where the
Department did not act on recommendations, we interviewed those
responsible to determine the reasons for inaction or obtained
documentation of these reasons.  We reviewed records of actions taken
through April 1996, to the extent they were readily available, but
did not validate information Department staff provided us on
corrective actions taken. 

We excluded from our review certain narrowly focused or interim
reviews or analyses made by OIG.  These include "Issues to Consider"
papers and student financial aid action memorandums.  We did not
include these documents in our study because the Department does not
formally track actions to address them, and these products are not
prepared in accordance with generally accepted government auditing
standards.  We were told that OIG no longer prepares Issues to
Consider papers, and the Department plans to begin tracking actions
that address recommendations made in student financial aid action
memorandums. 


STATUS OF ACTIONS ON PSI
RECOMMENDATIONS
========================================================== Appendix II

PSI issued one report, Abuses in Federal Student Aid Programs, in
1991, with recommendations for improving the management of student
financial aid.  The status of the Department of Education's actions,
through April 1996, that we report on was determined by the Permanent
Subcommittee on Investigations (PSI) staff who did the audit work. 
We did not assess the appropriateness of the determinations.  The
following identifies the report and describes the report's
recommendations, Department actions taken, and PSI's conclusions
about the actions' status and about whether the actions generally
addressed the recommendations. 


   ABUSES IN FEDERAL STUDENT AID
   PROGRAMS, S.  REPORT 102-58,
   1991
-------------------------------------------------------- Appendix II:1

Recommendation:  Develop minimum uniform quality assurance standards
with which all accrediting bodies that accredit proprietary schools
must comply, develop and carry out a meaningful review and
verification process designed to enforce compliance with these
standards, and terminate recognition if the Department determines
that an agency that accredits proprietary schools does not meet the
standards. 

Department action:  The Department has not issued these standards
because the 1992 amendments to the Higher Education Act (HEA) gave
accrediting agencies the flexibility to set their own. 

The Department, however, is required to assure itself that all
agencies have a systematic program of review to assess the validity
and reliability of their standards and be able to demonstrate that
their standards are valid indicators of quality.  During departmental
reviews of agencies seeking accrediting authority, the Department
assesses the adequacy of agencies' compliance to their own standards. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix II:1.1

Recommendation:  Require accrediting bodies to screen out substandard
schools, especially in the area of proprietary schools. 

Department actions:  Since 1992, the Department has (1) reduced the
number of years accrediting agencies are recognized, (2) fully
reviewed 44 agencies for compliance with regulations, and (3)
reviewed all agencies to ensure that they accredit schools that
participate in student aid programs administered by the federal
government. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix II:1.2

Recommendation:  Require accrediting agencies to improve their site
examination procedures by doing them at shorter intervals, providing
for unannounced visits, and increasing the training of team members. 

Department action:  The Department developed regulations mandating
that accrediting agencies perform (1) at least one on-site review of
a school or program participating in title IV programs when
determining accreditation, (2) at least one unannounced inspection of
schools providing vocational education and training between the time
agencies were accredited or preaccredited and the expiration of a
school's accreditation or preaccreditation, and (3) a site visit
within 6 months of establishment of a branch campus or after a
school's ownership has changed.  Also, while regulations do not
require levels of training length and content, they do require
competent and knowledgeable agency staff, qualified by experience and
training.  PSI continues to be concerned that agency staff do not
have the experience and expertise for reviewing and accrediting
proprietary schools. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix II:1.3

Recommendation:  Require accrediting agencies to share information
with one another on all adverse actions against schools and school
owners. 

Department action:  The Department issued regulations mandating that
accrediting agencies share with each other, state agencies, and the
Department information on all adverse actions against schools or
programs.  In March 1996, the Department implemented a new process
for following up on accrediting agency complaints about schools and
programs they accredit. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix II:1.4

Recommendation:  Require accrediting agencies to publicly disclose
when schools are coming up for accreditation or reaccreditation. 

Department action:  The Department mandated that agencies (1) publish
the year when a school or program subject to its jurisdiction is
being considered for accreditation or preaccreditation and (2)
provide an opportunity for third-party comments on the school or
program's qualifications. 

Agencies define time frames in their policies for publishing when
schools or programs are being considered for accreditation.  The
Department is on the agencies' mailing list for this information. 
Also, agencies routinely invite the Department to comment on schools
up for review and on any proposed changes to agency standards,
policies, or procedures. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix II:1.5

Recommendation:  Require accrediting agencies to develop and make
public uniform, performance-based consumer protection standards,
including, but not limited to, criteria on enrollments, withdrawal
rates, completion rates, placement rates, and default rates. 

Department action:  As a result of 1992 HEA, the Department requires
agencies to have standards that effectively address the quality of a
school's or program's success concerning student achievement in
relation to mission, including, as appropriate, consideration of
course completion, state licensing examination, job placement rates,
and default rates.  The Department requires agencies to make this
information publicly available but not in a uniform manner. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix II:1.6

Recommendation:  Work with the Department of Labor and industry to
develop and make widely available accurate information on current and
future market needs for proprietary school trades and skills that are
subsidized by federal student aid programs. 

Department action:  The Department worked with Labor to develop a
legislative proposal that would prohibit students in nondegree
programs from receiving Pell grants.  The Department believes that
states, because they are better at predicting local labor market
conditions, would have been permitted to use funds provided through
block grants from Labor to make skill grants available for nondegree
training.  The Congress did not accept this proposal. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix II:1.7

Recommendation:  Revise limits on the amount of federal student aid
for proprietary schools to better reflect the cost of equivalent
training available through other legitimate sources of postsecondary
education. 

Department action:  The Department is developing its legislative
proposals for reauthorizing HEA in 1997 and, at that time, will
consider this recommendation. 

PSI's conclusion about the recommendation's status:  Planned

PSI's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix II:1.8

Recommendation:  Assist the states by recommending uniform minimum
licensing requirements, covering areas such as (1) recruitment, (2)
advertising, (3) admissions, (4) separation of admissions from
financial aid, (5) site visits, (6) complaint procedures, (7)
completion and placement data, and (8) enforcement procedures. 
Refuse to recognize for participation in the Federal Family Education
Loan Program (FFELP) schools operating in states that do not adopt
minimum uniform licensing standards. 

Department action:  The Department has not recommended minimum
licensing requirements to the states.  It does not have the authority
to refuse to recognize schools operating in states that do not adopt
recommended minimum uniform licensing standards because it cannot
require establishment of these standards. 

PSI's conclusion about the recommendation's status:  None taken

PSI's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix II:1.9

Recommendation:  Appoint an assistant secretary for Student Financial
Assistance in the Office of Postsecondary Education (OPE),
accountable for all aspects of the student aid programs. 

Department action:  OPE was reorganized, making the Deputy Assistant
Secretary for Student Financial Assistance responsible for all
student aid functions including gatekeeping, monitoring, and
compliance functions.  In 1994 the Deputy Assistant Secretary split
responsibility with the Assistant Secretary for management of student
financial aid.  The Department plans to reintegrate these
responsibilities on or before October 1, 1996. 

As a result of its June 1995 hearings, PSI continues to be concerned
that the Department's approach to oversight is uneven and
inconsistent. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.10

Recommendation:  Perform a complete overhaul of the certification and
eligibility award and program review process. 

Department action:  As a result of the 1992 HEA, the Department is
required to recertify all schools participating in title IV programs
by July 1995.  Also, in 1995 the Department began to re-engineer its
oversight office by better using its data to identify schools not
complying with title IV requirements.  The new Institutional
Participation and Oversight Service Risk Analysis process, when
implemented, is designed to coordinate and apply data from the
Department's automated systems to sharpen the focus on high-risk
schools.  Meanwhile, updated school selection factors for program
review planning will be available in the summer of 1996 for
distribution to regional offices. 

Because the actions were recently taken, PSI could not determine if
they will address the recommendation. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.11

Recommendation:  Establish an office of oversight and enforcement to
oversee activities of all program participants. 

Department action:  All of the Department's offices with monitoring
and gatekeeping responsibilities were consolidated in OPE in 1992. 
Also, a new unit comprised of financial and program analysts was
established in the Guaranty Agency and Lender Oversight Service
(GLOS); its goal is to monitor guaranty agency and lender compliance
with title IV program requirements. 

As a result of its June 1995 hearings, PSI continues to be concerned
that the Department's approach to oversight is uneven and
inconsistent. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.12

Recommendation:  Streamline and modernize informational systems,
improving communication and data exchange within the Department and
among the Department and program participants. 

Department action:  The Department is implementing the National
Student Loan Data System (NSLDS).  Phase I (of III), which included
prescreening for student financial aid eligibility and calculating
default rates, was delayed for 1 year and was completed in November
1994.  Phases II and III, including providing information on the time
it takes schools to make refunds to students and send loan checks to
lenders, and a summary of all previous title IV aid a student
received while attending other schools, is on schedule and planned to
be completed in the summer of 1996. 

Because actions were recently taken, PSI could not determine if they
will address the recommendation. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.13

Recommendation:  Standardize interpretation and enforcement of
legislation and regulations. 

Department action:  A new office was established in 1995 to provide a
centralized source of title IV operational and policy requirements to
student financial aid professionals outside and staff within the
Department.  Some of the services provided include a toll-free line
through which student aid officers can contact Department staff, and
an electronic bulletin board system, both of which provide up-to-date
information about policies and regulations.  To standardize
enforcement, this office is also responsible for establishing policy
for and implementing a training program to disseminate legislative,
regulatory, and policy requirements. 

Because actions were recently taken, PSI could not determine if they
will address the recommendation. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.14

Recommendation:  Reduce overly complex regulations and procedures. 

Department action:  The Department initiated two programs to reduce
overly complex regulations and procedures.  First, starting in 1987,
schools that voluntarily demonstrated they meet certain eligibility
criteria were provided regulatory relief under the Quality Assurance
Program.  Specifically, schools were permitted to administer their
own process to verify that the information students reported on
financial aid applications was correct. 

Second, in April 1995, the Department began an experimental site
program to provide regulatory relief at more than 100 schools that it
determined performed well in administering student financial aid
programs.  Some exceptions for these schools include waivers of the
requirements to make multiple disbursements for single-term loans,
and to delay disbursing funds to a first-time borrower for 30 days. 

PSI's conclusion about the recommendation's status:  In progress

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.15

Recommendation:  Review and streamline current hearing and procedural
requirements, eliminating unnecessary delays while guaranteeing basic
due process protection. 

Department action:  The 1992 HEA removed the requirement that
administrative hearings be held "on the record." As a result, the
Department amended its regulations authorizing informal hearings to
be held by hearing officials rather than administrative law judges. 
The Department plans to look for other ways to simplify hearing
procedures while still ensuring due process and develop written
guidelines for OPE staff to use in participating in hearings. 

Because several actions are planned, PSI could not determine if they
will address the recommendation. 

PSI's conclusion about the recommendation's status:  Planned

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.16

Recommendation:  Address and report to the Congress on whether
accrediting agency officials involved in the performance of their
legitimate FFELP responsibilities should be subject to reasonable
liability limits or be statutorily protected from lawsuits. 

Department action:  The Department has not reported to the Congress
on whether accrediting agency officials should be subjected to
reasonable liability limits or statutorily protected from lawsuits. 
The Department did not know that the recommendation existed. 

PSI's conclusion about the recommendation's status:  None taken

PSI's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix II:1.17

Recommendation:  Require criminal investigative training and
expertise for its program compliance staff. 

Department action:  The Department provides annual training for all
program compliance staff, including training in techniques for
detecting and investigating possible fraud and abuse.  In the last 2
fiscal years, newly hired institutional reviewers have received 5
weeks of classroom training in programmatic topics and techniques for
conducting program reviews, including investigative techniques; and
experienced reviewers have received a 1-week refresher program.  All
regional institutional review staff will attend a 2-week training
program specifically on criminal investigative techniques next fiscal
year. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.18

Recommendation:  Develop credible inspection and follow-up procedures
to be instituted in program compliance reviews of schools. 

Department action:  A revised program review guide was issued in July
1994.  It follows a "focus item" approach that directs program
reviewers to review 34 key compliance areas.  In addition, the
Department revised institutional review standards to minimize the
time needed between finalizing a review and issuing a report to
ensure that significant findings receive prompt actions. 

PSI continues to be concerned that, in March 1995, the Department
discontinued its policy of performing all program reviews on an
unannounced basis.  PSI found that, in the past, some schools may
alter records and engage in activities designed to deceive reviewers
when reviews are announced. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.19

Recommendation:  Hire banking and financial auditing specialists to
assist the program compliance review staff in carrying out oversight
of FFELP financial intermediaries. 

Department action:  Since 1991, GLOS has hired 11 financial analysts. 
Of these, three were certified public accountants, and another three
were experienced auditors.  In addition, two supervisory financial
analysts were hired--one of whom had a background in financial
reviews of banks. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.20

Recommendation:  Improve procedures so that the program compliance
staff moves quickly to audit the financial aid records of closed
schools to determine losses and attempt to collect monies owed to the
students or the government. 

Department action:  The Department provides guidance on closed school
procedures, for example, by directing regional office staff to cancel
or postpone other low-priority scheduled activity, when necessary, to
ensure timely visits of closed schools.  Also, the Department has
established an emergency offset process to deny reimbursement
requests to schools that have not submitted closeout audits; denies
recertification when owners close schools that have not fulfilled
their closeout responsibilities; and issues final audit
determinations for all unaudited funds to establish liability against
a school, once the period for submitting closeout audits has expired. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.21

Recommendation:  Greatly expand and improve coordination and
communication with other federal agencies.  Seek the assistance of
the Departments of Labor and Veterans Affairs in sharing mutually
useful information. 

Department action:  The Department said that, in the past, it (1) had
discussions with Labor on coordination in which it determined that
the structure of each Department's respective programs was
sufficiently different that comparisons were not helpful and (2)
shared information about adverse actions with VA; however, this
effort was discontinued in the late 1980s because it was not
producing results.  As of April 1996, the Department had not
developed initiatives to improve its coordination with VA and Labor. 

PSI's conclusion about the recommendation's status:  None taken

PSI's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix II:1.22

Recommendation:  Develop ways to assist those students who continue
to be victimized by fraud and abuse with FFELP.  Increase efforts to
prevent this type of abuse in the future, and work with students to
ease financial burdens imposed as a result of past abuse. 

Department action:  The Department developed regulations allowing a
student's loan to be forgiven if the student was enrolled or withdrew
within 90 days of a school's closure and could not complete the
educational program for which funds were received.  The Department
provides relief to students whose loans were falsely certified by an
eligible school or, if a borrower's signature was falsified, the loan
may be forgiven. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.23

Recommendation:  Require principal participants in FFELP to submit
formal statements disclosing any interest they hold in other
participating FFELP entities.  Closely review disclosure statements
of principal participants and take appropriate action to prevent
instances of potential conflict of interest. 

Department action:  The Department is developing a regulatory
proposal requiring guaranty agencies to have a code of ethics that
would compel their staff and affiliates to disclose any interest they
hold in participating student loan entities.  The Department plans to
publish final regulations by December 1, 1996.  Also, Department
regulations require accrediting agencies to have clear and effective
conflict-of-interest controls for its officials. 

Because actions on guaranty agencies are planned, and no action has
been taken on other FFELP participants--such as officers, directors,
employees, and consultants of schools, originating lenders, loan
servicers, and state licensing authorities--PSI could not determine
if actions will address the recommendation. 

PSI's conclusion about the recommendation's status:  Planned

PSI's conclusion about whether the action generally addressed the
recommendation:  Cannot determine


----------------------------------------------------- Appendix II:1.24

Recommendation:  Strictly enforce the regulatory requirement that
accrediting agencies develop ethical standards to ensure that those
involved in key accreditation actions and decisions have no stake in
their outcome. 

Department action:  The Department has cited several agencies for
having incomplete conflict-of-interest polices, and two agencies have
been cited by the Department for serious noncompliance deficiencies
in this area. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.25

Recommendation:  Prohibit participating FFELP lenders from selling
the promissory note for a guaranteed student loan until after the
entire loan has been disbursed. 

Department action:  Regulations prohibit a lender from selling a
promissory note until the entire loan is disbursed. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.26

Recommendation:  Lenders should be required to wait a specified time
to allow for receipt of cancellations or refunds before sale of the
loan. 

Department action:  The Department believes that PSI's concerns are
no longer valid because lenders are now required to disburse an
entire loan before it can be sold (see action for previous
recommendation). 

PSI could not determine if the Department's claim is reasonable
because the Department could not provide any justification to support
its claims. 

PSI's conclusion about the recommendation's status:  None taken

PSI's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix II:1.27

Recommendation:  Student borrowers should be notified of the details
of the sale of their loan by both the seller and buyer. 

Department action:  Regulations require the old and new holder of a
loan to contact the borrower. 

PSI's conclusion about the recommendation's status:  Complete

PSI's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix II:1.28

Recommendation:  Establish a pilot program within participating
guaranty agencies and lenders to test the utility of conducting a
credit check on guaranteed student loan applicants to determine the
extent to which potential borrowers have significant adverse credit
histories.  In implementing this recommendation, make use of
information available from lenders who are already conducting such
checks. 

Department action:  HEA would have to be amended to conduct credit
checks on student loan applicants.  As a result, the Department
believed it lacked authority to implement this recommendation. 

PSI's conclusion about the recommendation's status:  None taken

PSI's conclusion about whether the action generally addressed the
recommendation:  No


STATUS OF ACTIONS ON OIG
RECOMMENDATIONS
========================================================= Appendix III

The Department of Education's OIG issued 24 reports with
recommendations for improving the management of student financial aid
programs between September 1991 and June 1995.  The status of the
Department's actions that we report on was determined by the OIG
staff who did the audit work.  We did not assess the appropriateness
of the determinations.  The following identifies the 24 reports and
describes these reports' recommendations, Department actions taken,
and OIG's conclusions about the actions' status and about whether the
actions generally addressed the recommendations. 


   REPORT ON THE TRANSITIONAL
   GUARANTY AGENCY'S ROLE IN
   GUARANTY AGENCY TRANSITION
   STRATEGY, ACN 05-40007, JUNE 2,
   1995
------------------------------------------------------- Appendix III:1

Recommendation:  Consider soliciting structured merger proposals from
strong guaranty agencies that meet predefined criteria for merging
with guaranty agencies that close. 

Department action:  The Department disagreed with this
recommendation.  On the basis of experience with guaranty agencies
that have merged, the Office of Postsecondary Education (OPE) has
found that the guaranty agencies lack the capacity to handle rapid
consolidation.  OPE is also identifying strong guaranty agencies
through its current round of reviews.  OIG maintains that, by acting
on the recommendation, the Department would have identified
candidates for mergers before a decision by a guaranty agency to
close. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix III:1.1

Recommendation:  Consider requiring early guaranty agency portfolio
reconciliations based on a statistical acceptance sampling plan. 
This will facilitate mergers by providing more accurate data for a
smoother transition. 

Department action:  The Department disagreed with this recommendation
but not with the underlying goal of ensuring data accuracy.  Because
of the expense involved, OPE believes reconciliation should be done
only in cases where it is likely an agency's loan system data are
inaccurate, when an agency's data will be converted to a new system
because of a consolidation, or when an agency leaves the Federal
Family Education Loan Program (FFELP).  OPE also believes its current
efforts to improve the quality of National Student Loan Data System
(NSLDS) data will require that certain guaranty agencies reconcile
their data.  OIG maintains the Department does not systematically
collect data on the accuracy of guaranty agency portfolios. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix III:1.2

Recommendation:  Consider working with the Transitional Guaranty
Agency (TGA) to ensure that appropriate performance measures are in
place to assess the continued need for TGA and its effectiveness. 

Department action:  OPE is analyzing data it obtained from guaranty
agency reviews to determine performance measures for guarantors as a
whole, and it will discuss with TGA what performance measures could
be used to assess its value to the Department. 

OIG's conclusion about status of action:  Planned

OIG's conclusion about whether the action generally addressed the
recommendation:  No


   FINANCIAL STATEMENT AUDIT--U.S. 
   DEPARTMENT OF EDUCATION FEDERAL
   FAMILY EDUCATION LOAN PROGRAM
   FOR THE YEARS ENDED SEPTEMBER
   30, 1994 AND 1993, ACN
   17-40302, MAY 31, 1995
------------------------------------------------------- Appendix III:2

Recommendation:  Review and amend cash reconciliation policies and
procedures to make reconciliations more timely and effective.  The
Department should (1) continue planned reconciliation enhancements,
(2) require timely posting of adjustments, (3) identify and establish
controls to prevent recurring problems, and (4) consider designing
the Education Central Automated Processing System (EDCAPS) to more
fully automate the reconciliation process. 

Department action:  OPE is (1) implementing improvements to enhance
the reconciliation program by directly loading general ledger data,
(2) analyzing recurring reconciliation problems to determine the
cause and implement proactive control systems, and (3) analyzing and
determining reconciliation needs during EDCAPS development and
replacing, if feasible, the current program to automate the process
further.  OPE established procedures to ensure timely adjustments to
the general ledger and Treasury Department report. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:2.1

Recommendation:  Require independent reviews of periodic fund balance
reconciliations and document the results. 

Department action:  OPE is performing independent reviews of periodic
fund balance reconciliations and documenting the results. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:2.2

Recommendation:  Modify policies and procedures to properly account
for loans receivable under Federal Accounting Standards Advisory
Board's (FASAB) Statement of Federal Financial Accounting Standards
Number 2 (FASAB 2) requirements.  Policies and procedures should
include (1) considering new reinsurance reporting requirements, (2)
exploring the capability of producing necessary management reports
using NSLDS, and (3) recalculating the allowance for subsidy on a
quarterly basis using management reports. 

Department action:  OPE is taking the following actions:  (1)
implementing accounting transactions to adjust the subsidy each time
a loan's receivable balance is adjusted, (2) modifying the system's
contract to adapt new/revised accounting transactions, and (3)
developing reports from NSLDS to adjust loans' receivable balances in
accordance with new policy.  OPE has developed new receivable
transactions in accordance with FASAB 2 and implemented the new
transactions in the primary accounting system (PAS). 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:2.3

Recommendation:  Test the accuracy and validity of the loan data in
NSLDS as part of the Department's routine guaranty agency oversight
function. 

Department action:  OPE has identified many data inaccuracies in
NSLDS and plans to develop management reports comparing NSLDS data to
data submitted by guaranty agencies and provide a list of
discrepancies to the Guaranty Agency and Lender Oversight Service
(GLOS).  OPE also included testing of the accuracy of NSLDS data in
an OMB compliance report for guaranty agency audits, and formed an
OPE data integrity group to better ensure the accuracy of NSLDS data. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:2.4

Recommendation:  Develop and monitor an automated audit trail of the
Guaranty Agency Fund Subsystem global edit override process. 

Department action:  OPE directed the systems contractor to remove the
global override edit code in the Guaranty Agency Fund Subsystem
database.  This would require individual edit overrides, which have
an automated audit trail. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   MANAGING FOR RESULTS:  REVIEW
   OF PERFORMANCE- BASED SYSTEMS
   AT SELECTED ACCREDITING
   AGENCIES, ACN 06-30004, MAY 8,
   1995
------------------------------------------------------- Appendix III:3

Recommendation:  Evaluate accrediting agencies' standards and
procedures for measuring success in student achievement.  To be most
effective, the standards should include (1) the most critical measure
of success--how many of the 2 million students enrolled each year
obtained a training-related job?  (2) reasonable steps to verify the
accuracy of member schools' reported performance outcomes, and (3) a
mechanism for holding schools accountable for unsuccessful job
training programs. 

Department action:  The Department previously took action it believed
addressed the recommendation.  It is implementing this recommendation
in accordance with a similar requirement in the 1992 HEA amendments. 
It believes that other factors besides job placement should be
measured.  Accrediting agencies should also have flexibility to set
standards for measuring these factors and develop other measurements
of success provided they can demonstrate their appropriateness to the
Department.  OIG does not believe this is sufficient for the
Department to obtain performance data on accrediting agencies. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix III:3.1

Recommendation:  Develop a process to collect and compile the
reported performance data from accrediting agencies to determine the
overall success of title IV-funded job training. 

Department action:  The Department disagreed with this
recommendation.  It believes this would impose a considerable burden
on accrediting agencies.  The agencies should be given flexibility to
collect and compile such data in ways that minimize burden and
maximize their usefulness for the agency and its member schools.  OPE
also believes methodological limitations affect the value of such
data.  OIG believes the Department needs to act to ensure itself and
the Congress that schools are providing quality programs and to
successfully implement its proposed new gatekeeping system introduced
in July 1995. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


   FINANCIAL STATEMENT AUDIT OF
   THE U.S.  DEPARTMENT OF
   EDUCATION FEDERAL DIRECT
   STUDENT LOAN PROGRAM FOR THE
   YEAR ENDED SEPT.  30, 1994, ACN
   17-48320, MARCH 17, 1995
------------------------------------------------------- Appendix III:4

Recommendation:  Require implementation of procedures to reconcile
advances with specific loans disbursed (in addition to an
all-activity reconciliation, which is performed monthly). 

Department action:  The Department is developing and automating a
transaction-based payment system to conduct this reconciliation.  It
plans to fully implement the system in July 1997. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.1

Recommendation:  Require schools to use the reimbursement method if
they do not adhere to the Department's cash management regulations
for 2 months.  (Under the reimbursement method, the Secretary may
require schools to document costs and enrollment of eligible students
and be reimbursed by the Department, rather than drawing funds in
advance from the school's title IV allocation.)

Department action:  The Institutional Participation and Oversight
Service (IPOS) is revising the program review guide to include
procedures to apply the reimbursement method to schools that do not
adhere to the Department's cash management regulations.  The
Department is preparing regulations to require schools to use
alternative loan origination if it is determined that federal funds
are at risk. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.2

Recommendation:  Encourage schools to transmit "actual disbursement
records" to the loan servicer (Servicing Center) the day of
disbursement (or as soon as practical) to enable the Servicing Center
to "book" the loan. 

Department action:  Schools have been advised of the need to transmit
disbursement records to the servicer as soon as possible.  The
Department also issued regulations to require schools to submit
origination records, promissory notes, and disbursement records
within 30 days of disbursements.  OPE is developing special reports
to be generated from the new origination system that will identify
schools that have drawn down funds and not reported disbursements in
a timely fashion. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.3

Recommendation:  Automate and integrate the balancing functions
between the Direct Loan Servicing System (DLSS) and the Financial
Accounting and Reporting System (FARS). 

Department action:  A Department contractor has developed an
automated reconciliation program for balancing the Student Loan
Servicing System to FARS.  The Department plans to put the program
into use after the Program Systems Service's (PSS) and the Accounting
and Financial Management Service's (AFMS) comments are addressed. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.4

Recommendation:  Provide enhanced training to schools, emphasizing
reconciliation and transaction dating requirements, file structures
and layouts, timing requirements, and critical interfaces with DLSS. 

Department action:  Regional training sessions on reconciliation and
cash management were held in the fall of 1995.  Videos of the
sessions are available to schools that missed the training. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes

Recommendation:  Require that all schools report actual loan
disbursement dates in the school-based software and mainframe
systems. 

Department action:  OPE sent a bulletin to schools in February 1996
clarifying the disbursement date and emphasizing the importance of
correct dates; it advised program review and OIG audit management of
this recommendation to incorporate it into planning program reviews
and OIG audits. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.5

Recommendation:  Require that mainframe and combination schools
perform comprehensive tests of the school-based systems before going
"live." (Going "live" refers to transmission of actual data to the
Department.)

Department action:  OPE developed and implemented a data interface
testing process between schools and DLSS.  Schools are required to
perform testing before going "live."

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.6

Recommendation:  Ensure periodic risk-based reviews are performed of
the school-level quality assurance systems, general and environmental
controls, backup and disaster recovery procedures, etc., to identify
problem areas for particular schools and the Federal Direct Student
Loan Program (FDSLP) as a whole. 

Department action:  OPE shared the recommendation with program review
and OIG audit management to allow them to better plan risk-based
program reviews and OIG audits and to prepare appropriate review and
audit guides.  It also revised its plan for periodic OMB-mandated
joint system control reviews to ensure that direct loan system
reviews are performed.  OPE plans to include direct loan internal
control procedures in its program review guide and enhance schools'
software to allow schools to measure performance. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:4.7

Recommendation:  Enhance school-based software and mainframe systems
to include loan limit checks at the loan servicer and schools. 

Department action:  OPE made changes to both the school software and
the DLSS Loan Origination Subsystem to include loan limit edits for
the second year of the program. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   INCONSISTENT INSTITUTIONAL PELL
   GRANT REPORTING RESULTS IN
   SIGNIFICANT EXPENDITURE
   DISCREPANCIES, ACN 11-30001,
   SEPTEMBER 26, 1994
------------------------------------------------------- Appendix III:5

Recommendation:  Require the chief financial officer of each
institution to reconcile and certify the September 30 expenditure
reports. 

Department action:  External and internal work groups have been
meeting to develop requirements for an Integrated Student Aid
Management System to provide a single source for student-level
expenditure reporting by the school business officer.  Some changes
are expected for the 1996-97 award year and beyond.  OPE also
identified the 100 schools with the largest reporting discrepancies
and followed up with them to identify the causes and resolve
problems.  OPE reduced authorizations to student aid report levels
for schools not filing timely data. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes

Recommendation:  Require the chief financial officer of each
institution to certify via a final accounting that all student-level
data are accurate as of September 30. 

Department action:  Same as action in previous recommendation. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:5.1

Recommendation:  Enhance controls over requests for reinstatement of
funds and for increases in authorization after the September 30
adjustment deadline by (1) requiring a revised final accounting of
student-level data to justify the increases, (2) imposing penalties
for repetitive inaccurate and late submission of final reports, and
(3) requiring that an independent auditor certify the amount of and
need for a reinstatement of funds once closeout is completed. 

Department action:  OPE implemented the following controls:  (1)
adjustments to authorization levels are to be based only on
student-level data, (2) the statement of accounts that includes the
Form 272 amounts as well as authorization and student aid report
levels will be sent quarterly to financial aid administrators and
business officers to aid in reconciliation, and (3) emphasis will be
placed on timely reporting of downward adjustments.  Additional
awards to students will be blocked until adjustments are reported. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   INELIGIBLE NON-U.S.  CITIZENS
   RECEIVED $70 MILLION IN PELL
   GRANTS, ACN 11-40000, SEPTEMBER
   9, 1994
------------------------------------------------------- Appendix III:6

Recommendation:  Initiate a data matching agreement with the Social
Security Administration (SSA) to verify citizenship for all federal
student aid applicants that claim U.S.  citizenship.  Include this
procedure with the forthcoming Social Security number verification. 

Department action:  The Department entered into a data matching
agreement with SSA in September 1995.  The match is run weekly. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:6.1

Recommendation:  Flag all applicant records that fail the citizen
verification and notify each applicant that his/her application is
suspended until the applicant can provide the Department with proof
of citizenship. 

Department action:  OPE has implemented this measure and issued
proposed regulations in September 1995. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   WHY USE PELL GRANTS FOR
   INSTRUCTION IN ENGLISH AS A
   SECOND LANGUAGE?  TAXPAYERS PAY
   MORE AND STUDENTS GET LESS, ACN
   09-40003, AUGUST 12, 1994
------------------------------------------------------- Appendix III:7

Recommendation:  Request the Congress to eliminate English as a
Second Language (ESL)-only programs from eligibility for the Pell
Grant program. 

Department action:  The Department believes the administration's
proposed skill grant program indirectly addresses this.  The proposal
would eliminate Pell grants for nondegree programs and transfer their
funding to the Labor Department.  Students in nondegree programs
would receive grants similar to Pell grants through Labor.  ESL
funding would not be specifically disallowed, but a substantial
portion of Pell grant funding for it would shift to the Labor
Department under the proposal. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix III:7.1

Recommendation:  If necessary, seek more adult education funds for
ESL instruction. 

Department action:  The Department did not propose any action to
address this recommendation. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


   REVIEW OF PERFORMANCE OF THE
   GUARANTEED STUDENT LOAN
   BRANCHES WITHIN STUDENT
   FINANCIAL ASSISTANCE PROGRAMS,
   ACN 04-20075, JANUARY 27, 1994
------------------------------------------------------- Appendix III:8

Recommendation:  Regional Guaranteed Student Loan Branch (GSLB) staff
should report to the Director of GLOS rather than the Field
Operations Service (FOS) to enforce line authority and
responsibility.  (GSLB has been reorganized and renamed the Guarantor
and Lender Review Branch (GLRB). 

Department action:  The Department disagreed with this
recommendation.  OPE believes that setting strategy for reviews by
regional offices is best achieved by GLOS working cooperatively with
the regions, IPOS, and a newly established Regional Operations
Division (ROD).  OIG believes that because ROD is administrative in
nature, the management problems it identified will not be resolved. 
It maintains that GLRBs must be directly aligned with a unit that
manages its operations for improvements to occur. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No\11


--------------------
\11 OIG plans to reassess the status of the Department's recent
activities on those recommendations that were not generally
addressed. 


----------------------------------------------------- Appendix III:8.1

Recommendation:  GLOS should be held accountable for the operations
of the regional GSLBs and (1) develop priorities for the most
vulnerable areas of review with the Deputy Assistant Secretary and
the Institutional Monitoring Division (IMD), (2) determine GSLB
objectives within the parameters set in (1), (3) determine resources
necessary to achieve GSLB objectives, and (4) establish the basis for
the budget with support from FOS. 

Department action:\12 The Department disagreed with this
recommendation.  OPE believes GLOS' role is to give direction to
regional office review activities and coordinate these activities
with IPOS and ROD.  OPE also stated that periodic planning sessions
have been held to develop a detailed review plan and budget.  Staff
needed to carry out the plan were identified during these sessions. 
GLOS, IPOS, ROD, FOS, and the regions participated in these sessions. 
OPE does agree, however, that GLOS should be responsible for
developing review priorities.  OIG believes GLOS should have greater
influence over GLRB operations and ROD's role should be that of a
support unit for GLOS and the regions. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


--------------------
\12 In its technical comments on a draft of this report, the
Department said that since April 1996, it has taken additional action
on this recommendation. 


----------------------------------------------------- Appendix III:8.2

Recommendation:  The Student Financial Assistance Programs (SFAP)
should fully develop and implement a system that will provide the
necessary data to be used in planning and conducting program reviews. 

Department action:  OPE responded to this recommendation by providing
a justification of how it undertakes lender reviews.  It did not
address the need for an information system. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


----------------------------------------------------- Appendix III:8.3

Recommendation:  GLOS, in conjunction with GSLB chiefs, should (1)
develop significant criteria to be used for the selection of
candidates for review, (2) assign weights to the significant
criteria, (3) select candidates for review on the basis of
application of weighted criteria, and (4) determine and assign
responsibility for reviewing selected candidates. 

Department action:  GLOS and GSLB chiefs developed review plans
during fiscal years 1994 and 1995.  These included several criteria
for prioritizing entities for review such as covering the largest
entities not reviewed in the last 2 years and responding to
complaints from consumers, OIG, or program participants.  OPE,
however, felt that weighing criteria would be unnecessarily
cumbersome and did not plan to implement that proposal. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:8.4

Recommendation:  GLOS should ensure coordination among GSLBs in
targeting and reviewing lenders. 

Department action:  OPE stated that regional offices have cooperated
in targeting and reviewing lenders and that its fiscal year 1994
review plan reflects this cooperation. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:8.5

Recommendation:  GLOS should ensure coverage of those lenders that
are the guaranty agencies' top 10 or top 2 percent of lenders in the
FFELP portfolios. 

Department action:  GLOS has provided additional written guidance to
guaranty agencies on lender coverage, but OIG was not satisfied OPE
explained how it would ensure review of any top 10 or top 2 percent
of lenders not reviewed by guaranty agencies as a result of
substitution of reviews of other lenders. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


----------------------------------------------------- Appendix III:8.6

Recommendation:  GLOS should implement strategic planning and develop
review priorities in conjunction with the regions.  In turn, GLOS
should then coordinate with FOS to determine that resources are
available.  The "constellation" process should be fully defined and
conveyed to GSLBs to assist in the systematic review of related
problem entities.  Appropriate training should be provided to
reviewers to ensure adequate reviews of targeted entities are
conducted. 

Department action:  According to OPE, (1) strategic planning was
implemented through the development of the fiscal years 1994 and 1995
review plans, (2) the constellation review process was implemented
and reviewer training has been initiated, and (3) guaranty agency
review guide and workpaper requirements were issued in March 1995. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:8.7

Recommendation:  GLOS should develop standards of performance to
measure the quality of the review process. 

Department action:  OPE is postponing changing employee performance
standards until Departmentwide changes in the appraisal system are
implemented.  OIG was not satisfied that OPE explained actions taken
to address disparate quotas set forth in regional General Performance
Appraisal System (GPAS) agreements or the unequal evaluations
reviewers receive because of the different quotas. 

OIG's conclusion about status of action:  Planned

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


----------------------------------------------------- Appendix III:8.8

Recommendation:  SFAP should (1) work within the Department to
specifically define and strengthen the knowledge, skills, and
abilities ranking factors used for hiring personnel for GLOS and
GSLBs; and (2) for current staff, arrange for and provide specific
technical training to ensure effective performance. 

Department action:  Knowledge, skills, and abilities factors for GSLB
chiefs and senior reviewer positions have been revised and rewritten. 
Training for (1) reviewer staff on computer applications, (2)
regulations resulting from the HEA amendments of 1992, and (3) policy
and workpaper standardization was conducted between September 1993
and November 1994. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:8.9

Recommendation:  SFAP, with input from GLOS, should develop training
profiles for both new and senior staff to ensure that employees
receive proper and adequate training to effectively perform their
jobs.  Consideration should be given to requiring reviewers to
achieve a certain number of hours of useful training each year. 

Department action:  OPE stated that it believes the use of newly
developed individual development plans help fulfill this
recommendation.  OIG maintains that OPE did not address the use of
progressive training profiles, which are more useful in helping staff
to assume greater responsibilities. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


---------------------------------------------------- Appendix III:8.10

Recommendation:  GLOS should do the following:  (1) Develop standards
for comprehensive reviews.  At a minimum, the standards should
include analyzing policies and procedures, internal controls,
financial statements, and software packages.  (2) Provide guidance to
the regions to foster uniformity and consistency in the performance
of program reviews.  (3) Develop a self-evaluation system to ensure
that the regions follow headquarters guidance and perform
comprehensive reviews. 

Department action:  A new lender audit process is being implemented,
and OPE plans to issue revised guidance to the regions on program
review procedures shortly afterwards.  GLOS is analyzing review and
evaluation criteria used by other government agencies responsible for
oversight of lenders' financial condition to determine their
applicability to guaranty agencies.  OIG was not satisfied OPE
addressed (3).  It also believes a self-evaluation system would allow
OPE to understand what guidance is not followed and why. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


---------------------------------------------------- Appendix III:8.11

Recommendation:  GLOS should require statistical sampling for
borrower file samples on lender reviews.  GLOS should ensure that
adequate training is provided to reviewers so that valid statistical
samples are drawn and documented. 

Department action:  OPE agreed and is planning a training session on
statistical sampling. 

OIG's conclusion about status of action:  Planned

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.12

Recommendation:  GSLBs should discontinue notifying the lender before
the site visit of the files to be reviewed. 

Department action:  OPE stated that, whenever possible, it will not
notify lenders before a site visit.  It added that, once the use of
statistical sampling is begun, some advance notice may be unavoidable
when samples are large. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.13

Recommendation:  GLOS should mandate computer usage on program
reviews.  SFAP should hire a computer specialist or develop expertise
among current staff.  Training on the developed programs should be
provided to reviewers. 

Department action:  All reviewers have been provided with notebook
computers and are using them.  Training was provided.  PSS provides
expertise, and recruitment has begun to fill regional systems
coordinator positions to provide expertise in the regional offices. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.14

Recommendation:  GLOS should develop standards for working papers
concerning content, retention, and indexing.  These standards should
be provided to staff, and the staff should be trained to successfully
complete working papers. 

Department action:  Workpaper standards were developed, and staff
were trained to develop standard workpapers in November 1994. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.15

Recommendation:  GLOS should develop standards for the expected level
of supervision.  At a minimum, these standards should include site
visits and working paper review. 

Department action:  Refinements were made to supervisory standards in
position descriptions, performance plans, and appraisals.  The new
workpaper standards require supervisory review and signoff. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.16

Recommendation:  GLOS should develop reporting standards that include
the lender's background information for placing findings in
perspective.  At a minimum, these standards should include how the
sample was drawn and from where; the universe size; and prior
reviews, including major findings. 

Department action:  The reporting format was developed and issued in
the form of written guidance and is used in all regional offices,
according to OPE.  The guidance discusses sections on background and
scope of review but not prior reviews and findings.  Regions also
share their background sections with each other to foster
improvement.  OIG did not believe OPE's guidance addressed reporting
on lender background and prior reviews or that OPE adequately
supported the sharing of background sections. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


---------------------------------------------------- Appendix III:8.17

Recommendation:  SFAP should become involved in the operations of the
regions such as significant ongoing and pending reviews, potential
referrals, national scope reviews, etc.  SFAP should fully implement
the clearance process of reports with liabilities over $50,000 and
referral issues.  Controls should be established to follow up on
reviews that merit headquarters clearance but are not received. 

Department action:  The Department disagreed with this
recommendation.  OPE believes that GLOS is already deeply involved
with the regions through the joint planning process and daily
informal communications.  OPE also considered submitting reports for
headquarters review as a quality assurance mechanism but concluded
that its team approach, along with clearer standards, better
training, and possibly peer review, will address quality concerns. 
Reports with over $50,000 in liabilities or referral issues are
already submitted to headquarters review.  OIG did not believe OPE's
response provided assurance that the clearance process is fully
implemented. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


---------------------------------------------------- Appendix III:8.18

Recommendation:  GSLBs should discontinue the practice of issuing
"tentative" closure letters for reviews. 

Department action:  OPE stopped this practice. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.19

Recommendation:  GLOS should institute and implement procedures
whereby all appeals and challenges are brought to the attention of
headquarters.  The procedures should include adequate controls for
follow-up of appeals and challenges that are not brought up to
headquarters. 

Department action:  OPE disagreed with the recommendation.  It stated
that most of this authority was delegated to regional offices. 
Branch chiefs have the authority and responsibility to bring
significant issues to headquarters' attention. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:8.20

Recommendation:  The Assistant Secretary should (1) propose that the
Congress amend the legislation to strengthen the Department's ability
to limit, suspend, fine, and terminate lenders and guaranty agencies;
(2) once these regulations and legislation are in place, direct GLOS
to provide training to GSLBs on the avenues available to reviewers;
and (3) direct GLOS to implement a system of determining that
appropriate actions are being taken against lenders and guaranty
agencies. 

Department action:  According to OPE, the Student Loan Reform Act of
1993 and other statutory authorities provided the Department the
authority to take strong action against guaranty agencies and
lenders.  Regional office FFELP staff received training on these
provisions in fiscal year 1994.  OIG found that the lender audit
guide does not address actions OPE may take against lenders based on
audit and review findings and that OPE did not address (3). 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


---------------------------------------------------- Appendix III:8.21

Recommendation:  GLOS should (1) implement policies and procedures to
follow up on why level 3 reviews and reviews with potential
indicators of fraud and abuse were not referred to OIG; (2) develop
procedures whereby noncooperation by the lender is considered a basis
for referral to OIG; and (3) clarify the GSLB mission so that the
branches become compliance components to aid the Department in
eliminating fraud and abuse. 

Department action:  OPE responded that its records show many
instances of referrals to OIG in cases where fraud and abuse were
suspected and that Department personnel are periodically reminded to
report suspected fraud and abuse to OIG.  It also advised OIG that it
rewrote the GSLB mission statements.  OIG did not believe OPE
addressed (2) or provided documentation to support its referrals to
OIG. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No (see footnote 11)


---------------------------------------------------- Appendix III:8.22

Recommendation:  GLOS should refocus its mission and functions to
complement changes made by the HEA amendments of 1992 and the Student
Loan Reform Act of 1993.  This will entail (1) monitoring the lender
audit reports to identify problem trends, (2) using reviewers to
problem solve at identified problem lenders, and (3) determining the
impact of FDSLP on the operations of GSLB. 

Department action:  OPE responded that GLOS refocused its mission to
support the Transition Task Force and has participated in a
Department steering committee to implement the new audit process. 
Also, lender audit results will be used to target site visits as soon
as they are available.  Some problem solving may be involved,
depending on the audit results.  OPE also amended its fiscal year
1994 budget on the basis of an analysis conducted in response to (3). 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   EFFECTIVENESS OF THE REGIONAL
   INSTITUTIONAL REVIEW BRANCHES
   MONITORING OF INSTITUTIONS
   PARTICIPATING IN THE STUDENT
   FINANCIAL ASSISTANCE PROGRAMS,
   ACN 05-20075, DECEMBER 21, 1993
------------------------------------------------------- Appendix III:9

Recommendation:  Identify the primary role of the regional
Institutional Review Branches (IRB) to (1) ensure compliance with
regulations through reviews that target abusive schools, (2) remove
abusive schools from participation in SFAP, and (3) recover misspent
funds through assessment of liabilities and fines. 

Department action:  FOS was reorganized as ROD in IPOS effective
January 30, 1995.  The new functional statement reiterates the
mission of IRBs. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.1

Recommendation:  Reassign technical assistance and training functions
currently being performed by regional IRBs. 

Department action:  SFAP established three training officer positions
for each region, increasing the number of positions from 10 to 30. 
Sixteen of the 30 were filled as of June 1995.  A centralized
Customer Service Unit was established to provide technical assistance
to the 10 regions.  It now accepts calls from all 10 regions. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.2

Recommendation:  Ensure that any secondary roles of the regional IRBs
are clearly identified, limited in nature, prioritized, and not in
conflict with their primary role. 

Department action:  OPE believes the reorganization will minimize the
nonreview responsibilities of IRBs but not entirely eliminate them. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.3

Recommendation:  Ensure that regional IRBs primary role and any
secondary roles are consistently reflected in performance agreements
and that they coincide with the revised mission statement. 

Department action:  Regional directors' staff GPAS will be revised to
reflect the review mission and newly developed standards and ensure
consistency among regions.  The new GPAS system was scheduled to take
effect in May 1996. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.4

Recommendation:  OPE should merge IMD-IRB function and the regional
IRBs into one organizational unit. 

Department action:  As of January 1994, FOS reported to IPOS. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.5

Recommendation:  Establish and maintain an information system that
tracks performance indicators that measure progress toward achieving
regional and headquarters mission.  The systems should track
performance indicators by individual institutional review and other
regional IRB activities; monitor resource utilization, including
staff time and travel expenses; review outcomes, including
liabilities and fines paid, administrative actions taken, and abusive
schools closed; and track the results of any appeals. 

Department action:  The Postsecondary Education Participants System
(PEPS) has been implemented and is used to generate management
reports to evaluate outcome-based performance management factors such
as those recommended.  Weekly summary reports are provided to
headquarters and regional management. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.6

Recommendation:  Develop an information system that meets
headquarters' and regional IRB managers' needs. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.7

Recommendation:  Develop appropriate system edit checks and data
entry verification procedures. 

Department action:  Three PEPS procedure memos were issued detailing
data entry and edit check procedures.  PEPS staff provide periodic
reports to highlight data entry and edit check problem areas such as
missing reviewer initials. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.8

Recommendation:  Develop an information system that compares
performance indicators to mission-driven goals. 

Department action:  ROD generates a weekly program review activity
report from PEPS to provide this information. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix III:9.9

Recommendation:  OPE should work with the Department's Personnel
Management Service and OPM to refine the reviewer position
description to identify the knowledge and skills that successful
reviewers need.  The position should require appropriate college
education or clearly defined types and quantities of prior student
financial aid experience that should be considered as a substitute
for education.  Only candidates that meet the new requirements should
be hired. 

Department action:  OPE issued senior reviewer position descriptions
that included appropriate knowledge, skills, and abilities, including
a knowledge of sampling techniques and written communications skills,
to recruit qualified senior reviewers.  OPE states it has since hired
approximately 100 senior reviewers. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.10

Recommendation:  Improve the quality and increase the quantity of
training for reviewers by establishing the following:  (1) new
employee training requirements to ensure that training is consistent
across regions and sufficiently detailed to ensure a common base of
knowledge for all staff and developed using regional managers'
insights, (2) a training profile to establish continuing professional
education requirements to enhance the development of reviewers, and
(3) minimum annual requirements for the total hours each reviewer
must spend in training (including regulatory updates and staff
development). 

Department action:  OPE developed a training module for newly hired
reviewers and conducted its first two sessions in late 1994.  The
program is 23 weeks long and consists of classroom instruction on the
statutes, regulations, and operation of the title IV programs and on
conducting reviews.  The remainder of the time is spent on the job. 
Although SFAP has not established a set training profile, it has
committed to providing ongoing annual training of at least a week's
duration for all reviewers; the specific topics and emphasis on the
training will vary, depending on the needs of reviewers and the
evolving work methods of IPOS.  IPOS also regularly provides
regulatory updates through conference calls and face-to-face meetings
of both headquarters and regional staff. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.11

Recommendation:  Require regional IRB employees to annually disclose
any actual or potential conflicts of interest to regional managers
for use in planning assignments. 

Department action:  FOS distributed a disclosure memorandum in
January 1995 outlining procedures for IRB employees to disclose any
actual or potential conflicts of interest for use in assignment
planning. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.12

Recommendation:  Eliminate recently reviewed schools from the factor
list and require regional IRBs to (1) give primary consideration to
reviewing schools with high factor scores and (2) document the reason
for selecting a school for review in the working papers. 

Department action:  OPE implemented a new prioritized selection
system to identify schools with high factor scores.  Regional offices
analyze the factor list to eliminate recently reviewed schools. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.13

Recommendation:  Require reviewers to use sound judgment in
determining the scope of a review by identifying review guide areas
likely to result in abuse or financial harm to students and the
Department such as refunds, ability-to-benefit, program length,
institution/student eligibility, and disbursement procedures that the
reviewer must cover in every review.  The remaining review guide
areas should be prioritized and completed as time allows.  These
priorities should be periodically reevaluated on the basis of past
review results and changes in SFAP requirements.  Recent reports by
other review agencies should also be used to expand the scope of
institutional reviews. 

Department action:  The most recent program review guide, issued in
July 1994, discusses the survey review, which is an initial
comprehensive review to determine where more in-depth reviews should
be made, and the concentrated review team approach, to be used when
potential problems are identified.  The guide also includes a list of
focus items for examination during survey reviews.  OPE also
implemented a system to periodically assess review priorities.  ROD
also stated that they use other agency reports, including those
issued by guaranty agencies, to assist in pre-review preparation,
establishing the scope of reviews, and comparing findings. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.14

Recommendation:  Develop and require the use of a standardized
sampling approach that reviewers can expand to a valid statistical
sample if they find significant problems.  The working papers should
identify the universe and methodology used to select the sample.  The
reviewer should project sample results to the universe to estimate
the significance of the deficiency and evaluate the results of any
required file reviews. 

Department action:  Regional reviewers completed training on
statistical sampling techniques in June 1995.  Currently, regional
reviewers are using these techniques whenever practical.  Statistical
sampling updates are provided, such as during a June 1996 meeting for
supervisors. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.15

Recommendation:  Establish minimum standards to ensure workpaper
documentation is sufficient to support findings.  The working papers
should include a summary and the findings; document calculations and
conclusions; identify information sources, preparer, and date;
document significant meetings; and include a table of contents, an
indexing system, and checklists cross-indexed to supporting working
papers. 

Department action:\13 Policies and procedures for workpapers
addressing issues such as documentation, supervision, and maintenance
were prepared.  The new standards were pilot tested in four regions,
and a team has been convened to make revisions on the basis of the
test results.  An additional testing period was planned and expected
to be completed by June 1996. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


--------------------
\13 In its technical comments on a draft of this report, the
Department said that since April 1996, it has taken additional action
on this recommendation. 


---------------------------------------------------- Appendix III:9.16

Recommendation:  Specify minimum requirements for the extent and
documentation of supervisory review.  Supervisory review should
ensure that findings are accurate and supported by sufficient
competent evidence. 

Department action:  A project on workpaper documentation is
addressing supervisory review.  IPOS is developing a checklist for
supervisory review of workpapers (see footnote 13). 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.17

Recommendation:  Establish file maintenance requirements for
institutional and review files.  At a minimum, secure all significant
documents on an institutional review in the official files. 
Discourage maintaining institutional documents in personal files. 

Department action:  The workpaper documentation project is also
exploring ways to maintain files consistently and ensure document
security.  A planned imaging project for long-term document storage
has been deferred for lack of funds. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.18

Recommendation:  Require IRB reports and Final Program Review
Determination Letters (FPRDL) to relate sample sizes (student counts
and related SFAP funding) to the sampling universe and funding under
review. 

Department action:  The program review guide issued in July 1994
includes a standard description of the sample/population size
relationship as it should appear in program review reports. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.19

Recommendation:  Require supervisory approval for any findings
dropped between the review report and FPRDL. 

Department action:  The workpaper documentation project will include
requirements for documenting dropped (or resolved) findings between
the preparation of the review report and issuance of FPRDL. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.20

Recommendation:  Require branch chiefs to sign all institutional
review reports and FPRDLs.  Section chiefs should sign all other
correspondence between the regional IRB and the reviewed schools. 
Regions without section chiefs should require branch chiefs to sign. 
Reviewers should not sign any official documents related to the
review. 

Department action:  IPOS issued (1) guidelines specifying the
signatures required to issue program review reports and FPRDLs and
(2) revised delegations of authority for final program review
determinations. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.21

Recommendation:  Revise institutional review closure standards to
minimize time needed between report and FPRDL issuance and ensure
that significant findings receive prompt actions. 

Department action:  Review closure standards and sample reporting
formats are contained in the July 1994 program review guide.  ROD
generates a periodic status report from PEPS for regional managers
showing program review reports and FPRDLs that exceed standard time
frames.  IPOS also issued a memo addressing recommendations for
expediting closure of program review reports. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.22

Recommendation:  Reduce the reliance placed on schools to quantify
findings. 

Department action:  Schools have been provided guidance on conducting
their file reviews.  Program reviewers provide the schools with a
valid random statistical sample with a 95-percent confidence level to
guide their reviews.  Samples are to be drawn in accordance with the
procedures outlined in the 1994 program review guide. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.23

Recommendation:  Establish standards for using pre-appeal
negotiations of FPRDLs. 

Department action:  IRB no longer participates in pre-appeal
negotiations with schools.  The program review guide outlines appeal
standards. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.24

Recommendation:  Establish follow-up procedures that include (1)
regional IRB comments on the final disposition of FPRDLs and
recommendations for administrative action and (2) review of
subsequent Independent Public Accountant (IPA) reports to ensure that
IPA commented on the implementation of corrective action recommended
by regional IRBs. 

Department action:  OPE said that the program review guide issued in
July 1994 addresses this recommendation. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.25

Recommendation:  Adopt appropriate standards for completing
institutional reviews. 

Department action:  Standards were implemented with issuance of the
program review guide in July 1994.  Also, FOS is required to monitor
and update performance standards. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.26

Recommendation:  OPE should conduct periodic peer reviews of the
regional IRBs to assess the adequacy of and adherence to established
standards and procedures and the utilization and possible nationwide
adoption of innovative techniques. 

Department action:  OPE has delayed implementation of its initiative
to establish peer reviews because of staff limitations.  It envisions
using a case management approach.  A study of the issue by an outside
consultant is also under way, and IPOS plans to reevaluate the issue
upon its completion. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.27

Recommendation:  Arrange for similar organizations to conduct
periodic external peer review of the institutional review function. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  Planned

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.28

Recommendation:  Expand regional IRB use of microcomputer
applications to include (1) automated file review work sheets; (2)
use of Pell and FFELP downloads; (3) communications, including the
transmittal of data and review products; and (4) any other
institutional review applications that will promote more effective
use of computer equipment. 

Department action:  (1) Regional review staff received notebook
computers and software.  All regions have systems support staff to
provide technical assistance and training.  (2) Regional staff
received training on a new automated reimbursement system in 1994 and
were issued manuals to ensure staff understood the need to diminish
the time between an institution's request for payment and actual
payment.  (3) A work group was formed to explore the use of new
computer applications such as automatic refund calculations and
standard paragraphs.  It plans to pilot test and implement some of
these applications in fiscal year 1996.  (4) ROD hired a systems
analyst who is working to resolve PEPS incompatibility issues.  Once
it is completed, a tracking and reporting system is expected to be
put in place by OPE. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.29

Recommendation:  Provide sufficient computer training to all staff to
ensure proficiency in the use of available computer equipment and
software. 

Department action:  OPE stated it provided training on the use of the
notebook computers and the installed software to regional reviewers
during the summer of 1994 and to IPOS headquarters staff in early
1995. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:9.30

Recommendation:  OPE should pilot test establishing staff specialist
positions, such as legal counsel, computer specialist, reimbursement
specialist, report resolution specialist, and statistician. 

Department action:  One computer specialist is being hired in each
region and in headquarters.  OPE said it is pilot testing the
establishment of the other recommended positions except for
statisticians in the regions.  Headquarters will provide statistical
support to the regions. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   THE SECRETARY'S DEFAULT
   REDUCTION INITIATIVE-- AN
   ALTERNATIVE APPROACH TO
   IMPLEMENTING SANCTIONS, MIR
   93-07, SEPTEMBER 14, 1993
------------------------------------------------------ Appendix III:10

Recommendation:  The Department should designate hearing officials
within OPE to conduct the informal hearings for schools appealing an
intent to terminate or other administrative action. 

Department action:  OPE is discussing the merits of formal hearings
with the Office of General Counsel (OGC) and OIG as well as the
feasibility of establishing an appeals process for termination and
fine actions within OPE.  Additional research is under way. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:10.1

Recommendation:  Define, through written guidelines or regulations,
the informal hearing process and the specific procedures for schools
to follow to demonstrate how they have diligently implemented
appendix D of the general provisions regulations for SFAP. 

Department action:  OPE's actions to address this recommendation will
depend on the outcome of the pilot project discussed in the following
recommendation's "Department action" section (see footnote 13). 

OIG's conclusion about status of action:  Planned

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:10.2

Recommendation:  Notify all schools that have exceeded the cohort
default rate thresholds defined by regulation that the Department is
considering administrative action due to the school's high loan
default rate.  Included in this notice should be the specific
guidance for the schools to follow to demonstrate how they have
diligently implemented appendix D. 

Department action:  OPE initiated a pilot project to take termination
actions against schools solely on the basis of their high default
rates.  Under the pilot design, OPE will require a small sample of
schools to provide specific documentation of their implementation of
appendix D, initiate termination action against those schools that do
not comply, and evaluate the success of the test.  Termination
notices were sent to two schools solely on the basis of their high
default rates.  As of February 1996, a decision is pending for one
school and a hearing date has not yet been set for the second school. 
In addition, IPOS plans to act against a select group of schools that
exceeded the threshold default rate for multiple years, that have not
filed an appeal, and that have more than 30 borrowers.  (See footnote
13.)

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:10.3

Recommendation:  The regional review staff should work with the
Compliance and Enforcement Division in evaluating documentation
submitted by schools.  The burden should be on the school to
demonstrate that it acted diligently and successfully to reduce
defaults, and the documentation submitted should be sufficient to
support the school's assertion.  If not, the school should be
terminated. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:10.4

Recommendation:  Initiate intent to terminate proceedings against all
schools that have exceeded the cohort default rate thresholds defined
by regulation and could not demonstrate to the Department that they
had diligently and successfully implemented appendix D. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   ED SHOULD PROHIBIT CONFLICTS OF
   INTEREST BETWEEN GUARANTY
   AGENCIES AND AFFILIATED
   ORGANIZATIONS, MIR 93-02, MARCH
   15, 1993
------------------------------------------------------ Appendix III:11

Recommendation:  The Department should amend its regulations to
prohibit guaranty agencies or their officers and employees from
having any affiliation with an entity that is a participant or
service provider in FFELP.  Develop timetables for implementation. 
If necessary, seek legislative changes to accomplish this goal. 

Department action:  The Department plans to issue amended regulations
addressing guaranty agencies' conflict of interest by December 1996. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   TITLE IV FUNDING FOR VOCATIONAL
   TRAINING SHOULD CONSIDER LABOR
   MARKET NEEDS AND PERFORMANCE
   STANDARDS, MIR 93-03, MARCH 12,
   1993
------------------------------------------------------ Appendix III:12

Recommendation:  The Department should take the lead in convening an
interagency task force to study different funding approaches for
students enrolled in vocational training programs.  Funding
approaches should include the labor market needs of employers and
success rates of schools in placing graduates. 

Department action:  OPE and OIG agreed that the State Postsecondary
Review Entity (SPRE) regulations issued in April 1994 required SPREs
to consider schools' responses to labor market needs in evaluating
their performance.  The administration's proposed Skill Grant Program
for funding vocational training would also require participating
schools to report job placement data to prospective students.  (Due
to the lack of federal funding, however, SPREs are not currently
operating.)

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   OPE'S LENDER AND GUARANTEE
   AGENCY OVERSIGHT FUNCTION
   SHOULD FOCUS MORE ON AUDIT
   FOLLOW-UP, ACN 11-20015,
   DECEMBER 1, 1992
------------------------------------------------------ Appendix III:13

Recommendation:  Notify AFMS to establish accounts receivables
totaling almost $1 million for the four guaranty agency audit reports
described in this audit report. 

Department action:  The liabilities identified in the OIG report were
fully paid. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.1

Recommendation:  Notify AFMS to establish an accounts receivables at
the time it finalizes Program Determination Letters (PDL) and ensure
that AFMS records the correct amount. 

Department action:  OPE implemented a process to establish accounts
receivables whenever a PDL identifies a civil penalty or liability
owed by a participating institution.  OPE tracks progress quarterly. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.2

Recommendation:  Implement an audit recommendation follow-up tracking
system to track audits until the Lender and State Agency Review
Branch (LSARB) receives documentation verifying that auditees
completed all corrective actions and paid amounts due the Department. 

Department action:  A database system for tracking audits was
developed.  It covers schools, lenders, and guaranty agencies and
includes amounts owed that have not been recovered. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.3

Recommendation:  Review all prior guaranty agencies' audit reports
and (1) identify all recommendations that auditees have not
implemented and all audit-related accounts receivables not paid, (2)
notify AFMS to establish accounts receivables for amounts not
recovered, and (3) enter all incomplete corrective actions in the
audit follow-up tracking system. 

Department action:  OPE reviewed prior PDLs, verified corrective
actions for completeness, followed up as needed, and entered all
incomplete corrective actions into the database system. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.4

Recommendation:  Notify OPE management that, because of the
priorities of other duties and a lack of staff, LSARB can not perform
all its delegated duties.  In its notice to OPE management, LSARB
should identify all those duties it cannot perform and their
associated risk. 

Department action:  The previously described database system for
tracking audits was implemented.  GLOS sought an increase in staff to
meet its responsibilities, including new ones resulting from the 1992
HEA amendments.  OPE states that GLOS attempted to negotiate shifting
oversight of guaranty agencies' reviews of lenders to IPOS. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.5

Recommendation:  Develop criteria for acceptable alternate guaranty
agency review plans and for approval of the substitution or extension
of lender and institution program reviews. 

Department action:  GLOS has developed criteria under which guaranty
agencies can make substitutions.  These include cases, for example,
where schools have closed or merged or that were recently reviewed by
another entity.  Substitutions are agreed to in writing. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.6

Recommendation:  Develop a tracking system to ensure that guaranty
agencies perform the required program reviews and monitor
substitutions and extensions. 

Department action:  Because of changes and uncertainty in the
guaranteed loan community, including the likely departure of many
lenders and guaranty agencies from participation in FFELP, GLOS
decided not to establish a tracking system.  It is relying on the use
of direct requests for approval of substitutions as previously
discussed. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.7

Recommendation:  Adopt a policy requiring the return of the midpoint
when the projected amount to be recovered is a range. 

Department action:  GLOS revised its policy to require the recovery
of midpoint amounts. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.8

Recommendation:  Conduct an analysis of and maintain support for its
decision when the amount sought for recovery varies from the midpoint
of a projected range. 

Department action:  GLOS established a practice of requiring
reviewers to maintain support for recovery amounts that vary from
midpoint projections. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:13.9

Recommendation:  Establish a goal to elevate program reviews to the
Assistant Secretary when LSARB cannot reach a decision within 6
months from the program review issue date. 

Department action:  GLOS does not believe implementing this
recommendation is feasible because of the following:  (1) Complex
review issues are referred to headquarters for resolution before
issuance of a review.  OPE believes a 6-month limit for resolving
issues may not be realistic in these cases.  (2) Elevating unresolved
issues to the Assistant Secretary is unlikely to improve the
timeliness of decisions because the appeal level would move to the
Secretary, requiring additional reviews and clearances. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   ED NEEDS TO CHANGE THE
   LEGISLATIVE DEFINITION OF LOANS
   IN REPAYMENT, MIR 92-13,
   SEPTEMBER 4, 1992
------------------------------------------------------ Appendix III:14

Recommendation:  The Department should request the Congress to modify
the definition of loans in repayment in HEA or allow the Department
to define loans in repayment. 

Department action:  OPE initiated an effort to consult with
appropriate Department officials to determine if a recommendation
should be made to the Secretary to propose a statutory amendment to
HEA as part of its 1997 reauthorization.  However, because of
uncertainty about the future of FFELP and efforts to reduce
regulatory burdens, the effort was set aside pending future
developments.  OIG does not believe OPE has provided sufficient
documentation of its activities. 

OIG's conclusion about status of action:  Planned

OIG's conclusion about whether the action generally addressed the
recommendation:  No


   LOAN SERVICERS FOR THE
   GUARANTEED STUDENT LOAN
   PROGRAMS (GSLP) NEED TO BE
   BETTER CONTROLLED TO SAVE ED
   MILLIONS IN GSLP LOSSES, MIR
   92-12, AUGUST 19, 1992
------------------------------------------------------ Appendix III:15

Recommendation:  Require FFELP servicers to report to the Department
their FFELP portfolios by size and lenders (report should match
quarterly interest billing reports).  The reporting should also
identify each guaranty agency being serviced and identify any other
computer time-sharing with FFEL lenders. 

Department action:  The Department issued regulations on April 29,
1994, that incorporate much of the recommended actions but make no
reference to computer time-sharing. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:15.1

Recommendation:  Establish regulations that specifically require
FFELP servicers to provide Department representatives timely access
to all FFELP portfolio information, records, operations, and
personnel.  This should include the servicer's FFEL loan servicing
portfolio in total, not just a single lender or guaranty agency, or
loan portfolio that involves computer time-sharing. 

Department action:  The Department published a Notice of Proposed
Rulemaking on February 17, 1994, that incorporates the recommended
actions.  The final rule was published on April 29, 1994. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:15.2

Recommendation:  Require FFELP servicers to provide and maintain
documentation in support of due diligence claims for delinquent
borrowers.  This should specifically include support for
computer-generated records.  In addition, the Department should
require servicers to develop and apply adequate internal controls
over due diligence and their documentation of delinquent borrowers. 
The lenders being serviced should be required to substantiate on a
timely basis that their servicers are in compliance. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:15.3

Recommendation:  Allow the Department to apply the limitation,
suspension, and termination process to FFELP servicers.  In addition,
allow the Department's program review staff to fine servicers who
knowingly violate FFELP laws and regulations. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   IMPROVING DOCUMENTATION
   REQUIREMENTS FOR DETERMINING
   ELIGIBILITY FOR STUDENT
   FINANCIAL ASSISTANCE PROGRAMS,
   MIR 92-11, JULY 29, 1992
------------------------------------------------------ Appendix III:16

Recommendation:  Require schools to maintain a copy of each student's
high school diploma or General Education Degree on file.  In cases
where such documentation is unavailable or cannot be provided by the
student, the Department should require that the student be admitted
to the school only under the Department's ability-to-benefit
requirements. 

Department action:  OPE developed a requirement that such
documentation be maintained as part of a Notice of Proposed
Rulemaking for ability-to-benefit standards.  However, OMB rejected
the final regulations in November 1994, and the Department did not
pursue the matter further. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   STRICTER STANDARDS NEEDED FOR
   THE GRANTING OF FORBEARANCES,
   MIR 92-10, JUNE 30, 1992
------------------------------------------------------ Appendix III:17

Recommendation:  Promulgation of a mandatory requirement that defines
for what cumulative length of time consecutive and nonconsecutive
forbearances can be granted and how often the borrower's eligibility
for a forbearance should be reevaluated. 

Department action:  OPE believes that 1992 HEA amendments and
subsequent regulations addressed this recommendation.  Basically, the
statute allows for forbearance up to 3 years depending on the
borrower's debt-to-income ratio, and the regulations allow for
individual forbearance periods up to 1 year.  OIG believes
regulations proposed by the Department regarding forbearance address
its recommendation that eligibility be reevaluated. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:17.1

Recommendation:  Guidance, in the form of a "Dear Colleague" letter,
should be issued to clarify the following expectations:  (1) Detailed
documentation is to be retained to fully support each forbearance. 
If the forbearance is based on financial hardship, determination and
approval of the hardship should be clearly documented in the file;
and (2) Borrowers are to be provided an option to select (within the
latitude provided by the regulations) the forbearance terms that best
meet their needs. 

Department action:  The Department issued regulations specifying
borrowers' rights to forbearance options and lender documentation
requirements.  In consultation with the student aid community, OPE is
developing a standard forbearance form that will ensure borrowers are
aware of their forbearance options. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   EFFECTIVENESS OF THE OFFICE OF
   POSTSECONDARY EDUCATION'S
   EFFORT TO COLLECT PERKINS LOAN
   EXCESS CASH, MIR 92-08, APRIL
   1, 1992
------------------------------------------------------ Appendix III:18

Recommendation:  Determine excess cash in the manner described in the
"Dear Colleague" letters to schools and request the schools to return
the funds. 

Department action:  OPE identified 641 schools with about $53 million
in excess cash in accordance with the recommendation and completed
collection of the excess in April 1994. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:18.1

Recommendation:  Complete the planned initiatives to more
aggressively collect excess cash, including (1) imposing sanctions on
nonrespondents; (2) requiring better coordination within the
Department to promptly notify the Division of Program Operations and
Systems when excess cash is identified or returned; and (3)
initiating fines or other administrative action for not returning
excess cash. 

Department action:  In response to (1) and (3), OPE developed a
system of imposing fines if a school does not respond to the
Department's demand for excess cash refunds after a certain time
period.  In response to (2), OPE revised the program review guide to
include an examination for excess cash in Perkins Loan funds and
established a process to notify the Campus-Based Programs Systems
Division of schools where excess cash has been found. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:18.2

Recommendation:  Ask OGC to review the HEA provisions and advise if
any impediment exists to offsetting excess cash against federal
capital contributions (FCC). 

Department action:  OGC identified provisions of the Department's
regulations that permit such offsets.  However, a provision in the
1992 HEA amendments requires that any collectible excess cash amounts
be reduced by the amount of FCC received in the last 2 completed
award years.  OPE believes this reduces the amount of excess cash the
Department can collect. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:18.3

Recommendation:  Notify the Financial Management Service (FMS) to
establish an account receivable for the estimated excess cash for
each school that fails to respond to the "Dear Colleague" letter
within 60 days. 

Department action:  OPE incorporated this step as part of the process
for notifying the Campus-Based Systems Division of schools with
excess cash. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   ABOUT $300 MILLION IN
   GUARANTEED STUDENT LOANS AND
   PELL GRANTS WILL BE AUTHORIZED
   FOR STUDENTS WITH DEFAULTED
   LOANS FOR THE 12 MONTHS ENDING
   JUNE 30, 1992, MIR 92-07, MARCH
   19, 1992
------------------------------------------------------ Appendix III:19

Recommendation:  Take immediate action to incorporate tape dump
default data into the screening system in place at the central
processor. 

Department action:  The Department implemented the Guaranty Agency
Default Match in the central processing system in July 1992.  This
match identified applicants for title IV assistance who were listed
as being in default on another title IV loan in the Department's tape
dump.  A comment was printed on the student aid report sent to the
applicant's school(s) advising them of the default and seeking
confirmation of resolution. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes

Recommendation:  Modify the current screening process to more
appropriately identify applicants that have previously defaulted on a
student loan and not authorize them further student financial aid
funds. 

Department action:  The Department is conducting the title IV default
match with Social Security number and date of birth.  This match is
used to identify applicants that have defaulted on any student loans
assigned to the Department for collection. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   OWNERS OF CORPORATE PROPRIETARY
   SCHOOLS NEED TO BE HELD
   PERSONALLY LIABLE FOR TITLE IV
   PROGRAM LOSSES, MIR 92-06,
   MARCH 16, 1992
------------------------------------------------------ Appendix III:20

Recommendation:  Redraft the program participation agreement to
require owners of corporate proprietary schools to personally
guarantee program-related liabilities. 

Department action:  The Department issued final regulations in April
1994 defining circumstances under which school owners responsible for
program-related liabilities would be allowed to continue to
participate in the program. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:20.1

Recommendation:  Develop policy and implement procedures to ensure
that program-related liabilities are aggressively pursued and
collected.  At a minimum, the procedures should require that all
schools participating in the title IV program report to the
Department, on at least a yearly basis, their current title IV refund
liabilities and certify the accuracy of such statements as a
prerequisite to further program participation. 

Department action:  A contract was awarded to conduct initial reviews
of school financial statements upon their annual submission.  The
1992 HEA amendments also require annual compliance audits of schools. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   ED NEEDS TO STRENGTHEN STUDENT
   LOAN CURE PROCEDURES, MIR
   92-05, MARCH 13, 1992
------------------------------------------------------ Appendix III:21

Recommendation:  Amend the regulations to allow loans with major due
diligence violations to be cured only if lenders obtain either three
full monthly payments or a signed repayment agreement plus two full
monthly payments. 

Department action:  The Department included a bulletin it previously
issued on cure procedures in new regulations it issued on December
18, 1992.  When it was first issued in 1988, this bulletin provided
that a loan could be considered cured upon receipt of one monthly
payment or a signed repayment agreement from the borrower.  The 1992
regulations did not change this requirement. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


---------------------------------------------------- Appendix III:21.1

Recommendation:  Amend the regulations to limit the time period
during which a lender can cure a loan. 

Department action:  In the December 1992 regulations, the Department
revised its bulletin on cure procedures to limit the time a lender
has to cure a loan to 3 years for any loans that lose their
reinsurance status on or after December 1, 1992.  OIG concluded that
any time limit over 1 year would lead to unacceptably high default
rates unless additional measures were taken to prevent higher
defaults. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No


---------------------------------------------------- Appendix III:21.2

Recommendation:  Amend the regulations to limit the proportion of
loans that a lender can cure. 

Department action:  The Department did not issue any provisions in
its cure bulletin addressing this recommendation.  Negotiated
rule-making sessions, held to develop the cure bulletin, did not
develop a consensus on this issue.  The Department decided further
efforts would not be productive. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


---------------------------------------------------- Appendix III:21.3

Recommendation:  Use these recommendations in any cure procedures
that are developed for guarantee agencies. 

Department action:  Upon completion of the negotiated rule-making
sessions previously mentioned, the Department believed it had
achieved as much as possible and did not wish to further address the
cure procedures.  Department officials also believe that lenders have
incentives to promptly cure loans to avoid higher servicing costs and
loss of interest payments and that the removal of a statutory
provision that limited its ability to refuse to cure loans under
certain circumstances has given the Department sufficient authority
to impose these limitations. 

OIG, however, believes that stricter requirements are necessary to
convince lenders that the federal government is serious about
enforcing its rules for collecting guaranteed loans, and it asserts
that the Department will incur about $150 million in excess costs
under current cure procedures. 

OIG's conclusion about status of action:  None taken

OIG's conclusion about whether the action generally addressed the
recommendation:  No


   THE OFFICE OF STUDENT FINANCIAL
   ASSISTANCE DID NOT ASSURE THAT
   ALL INSTITUTIONS SUBMITTED
   AUDIT REPORTS OR THAT IT
   RECOVERED ALL MISSPENT FUNDS,
   ACN 11-00010, FEBRUARY 6, 1992
------------------------------------------------------ Appendix III:22

Recommendation:  Identify and refer for termination all schools with
overdue audit reports, starting with those most overdue and with the
most title IV funds at risk. 

Department action:  OPE has in place a system of referring all
schools with overdue audits to the Compliance and Enforcement
Division (CED) for administrative action, including termination.  The
Audit Resolution Branch (ARB) is in the process of notifying schools
with missing audits by letter of the requirement to submit one and
that action will be taken if they do not do so.  OPE statistics show
that many termination and fine actions have been taken against
schools, including 54 terminations in fiscal year 1992. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.1

Recommendation:  Develop controls to ensure that all audit reports
are entered into the Institutional Data System (IDS) for all
institutions covered by each audit report. 

Department action:  ARB stated it had implemented the recommended
controls.  However, on the basis of a follow-up review, OIG does not
believe the controls are sufficient (see footnote 13). 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  No


---------------------------------------------------- Appendix III:22.2

Recommendation:  Develop controls to ensure that when audit reports
are overdue, institutions are notified and appropriate actions are
taken. 

Department action:  ARB adopted the recommendation and modified IDS
to track overdue audits. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.3

Recommendation:  ARB should reconcile its audit appeals list with the
FMS accounts receivable report and submit an amended audit clearance
document (ACD) to FMS for all appeals that were decided. 

Department action:  ARB submitted an amended ACD to FMS for all
decided appeals.  It also obtains a signature from FMS personnel
verifying receipt of amended PDLs or ACDs. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.4

Recommendation:  Implement procedures to require ARB reviewers to
reconcile the audit appeals list with the FMS accounts receivable
report each quarter.  Submit an amended ACD to FMS within 5 days for
all appeals that it settles, or an administrative law judge decides
so that FMS can resume collection actions. 

Department action:  ARB identified and reconciled appeals versus
follow-up cases and also reconciled fines written off or adjusted in
the prior administration.  Pending informal fines were referred to
CED for action.  ARB has adopted a policy of immediately referring to
CED cases in which audits are submitted late. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.5

Recommendation:  Establish one fine schedule for all violations, that
is, significant audit deficiencies, recurring audit deficiencies, and
failure to comply with the biennial audit requirement.  Also, the
Division of Audit and Program Review should establish a minimum fine
amount and progressively increase the amount of the fine up to the
full regulatory authority of $25,000 per violation. 

Department action:  CED has developed a formal fine schedule. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.6

Recommendation:  Eliminate the practice of proposing informal fines
and give ARB the authority to assess formal fines. 

Department action:  ARB has taken steps to eliminate informal fines
and establish formal referral procedures to notify FMS.  Appeals are
handled in CED.  ARB implemented this process for late or missing
audits and expects to have the entire process implemented in the
spring of 1996. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.7

Recommendation:  Establish controls to ensure that ARB promptly
notifies FMS to establish accounts receivable when fines are
assessed. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.8

Recommendation:  Implement an appeal process for fines. 

Department action:  Same as action for previous recommendation. 

OIG's conclusion about status of action:  In progress

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:22.9

Recommendation:  Review all audits within 30 days of report issuance
and request the schools to provide the auditors with all supporting
documentation for unsupported costs.  Notify the schools that if they
do not provide the information to auditors and have auditors report
the results of their review by the specified date, ARB is required to
disallow the costs. 

Department action:  OPE established a process of assigning audits to
staff for the type of review recommended within 5 days of receipt and
has hired additional staff to conduct these reviews. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


--------------------------------------------------- Appendix III:22.10

Recommendation:  Accept only audited documentation as support for
expenditures and disallow all unsupported costs when the schools have
not provided the auditors with satisfactory supporting evidence. 

Department action:  ARB established a policy of requiring schools to
refund amounts for unsupported costs unless they provide
documentation verified by their auditors.  When a liability is
$25,000 or more, such verification must be provided on the auditor's
stationery within 45 days of the time the school receives the program
determination report. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


--------------------------------------------------- Appendix III:22.11

Recommendation:  Consider waiving the student financial aid biennial
audit requirement for schools that received less than $25,000 in
annual funding.  Also, increase the waiver up to $100,000, after
consultation with OMB. 

Department action:  ARB has occasionally modified the audit
requirement for schools receiving small amounts of federal student
aid funds, allowing these schools to submit audits every 3 to 4
years.  According to the Department, existing statute and regulations
do not allow it to waive the audit requirement entirely.  At this
time, the Department indicated no plans to raise the threshold to
$100,000. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


--------------------------------------------------- Appendix III:22.12

Recommendation:  Ensure that ARB procedures to calculate the amount
of misspent funds for all disallowances with error rates over 10
percent are implemented by all reviewers. 

Department action:  ARB established a process to project audit
liabilities to the total population in cases where audit error rates
exceed 10 percent.  This included supervisory review. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   ED SHOULD ACT TO REDUCE
   INTEREST AND SPECIAL ALLOWANCE
   COSTS FOR CANCELLED STUDENT
   LOANS, MIR 91-10, SEPTEMBER 3,
   1991
------------------------------------------------------ Appendix III:23

Recommendation:  Amend regulations to provide that, for a school with
a loan cancellation rate above 10 percent, the guaranty agency may
not guarantee a loan and lenders may not disburse the loan check
until the student has attended class for 30 days.  As an alternative,
the amount of interest and special allowance paid to the holders of
canceled FFELP loans will depend on the cancellation rate of the
school the student attends. 

Department action:  The 1992 HEA amendments require that for loans
made on or after October 1, 1992, lenders may not charge interest or
receive interest subsidies for loans in which disbursement checks
were not cashed or electronic funds transfers not completed.  In
addition, lenders may not receive interest on first disbursements of
FFELs for any period before 10 days of the disbursement of a loan by
check, and 3 days before the disbursement of a loan by electronic
funds transfers.  OPE issued guidance to implement these provisions. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:23.1

Recommendation:  The regulations should be amended to provide that
the original lenders cannot sell FFELs to the secondary market until
the checks are cashed. 

Department action:  The 1992 HEA amendments prohibit lenders from
selling or transferring a promissory note for any FFEL until its
final disbursement has been made.  OPE issued guidance and
regulations to implement this provision. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


   IMPROVEMENTS NEEDED TO
   STRENGTHEN GUARANTEE AGENCY
   SCHOOL REVIEWS, MIR 91-09, JUNE
   19, 1991
------------------------------------------------------ Appendix III:24

Recommendation:  Establish minimum standards in each of the standard
areas applicable to guarantee agency reviews. 

Department action:  OPE included these standards in the revised
school site review guide for guaranty agencies issued in July 1992. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


---------------------------------------------------- Appendix III:24.1

Recommendation:  Revise the school review guide to improve the
comparability and usefulness of the school review reports. 

Department action:  OPE revised the school site review guide used by
guaranty agencies to incorporate specific items suggested by OIG. 
The revised guide was issued in July 1992. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes

Recommendation:  Implement the proposed change to school review
selection criteria as soon as possible. 

Department action:  The Department issued regulations in December
1992 that outlined new school review selection criteria for guaranty
agencies. 

OIG's conclusion about status of action:  Complete

OIG's conclusion about whether the action generally addressed the
recommendation:  Yes


STATUS OF ACTIONS ON GAO
RECOMMENDATIONS
========================================================== Appendix IV

GAO issued eight reports with recommendations for improving the
management of student financial aid between April 1992 and July 1995. 
The status of the Department's actions is based on information that
our staff developed.  The following identifies the eight reports and
describes the reports' recommendations, Department actions taken, and
our conclusions about the actions' status and about whether the
actions generally addressed the recommendations. 


   STUDENT FINANCIAL AID:  DATA
   NOT FULLY UTILIZED TO IDENTIFY
   INAPPROPRIATELY AWARDED LOANS
   AND GRANTS (GAO/HEHS-95-89,
   JULY 11, 1995)
-------------------------------------------------------- Appendix IV:1

Recommendation:  Take actions to improve the accuracy and
completeness of student financial aid data, such as continuing to
screen data entered into the National Student Loan Data System
(NSLDS) to ensure a consistent format and testing the accuracy and
validity of data in NSLDS. 

Department action:  The Department is carrying out the
recommendation.  In addition, it is formulating and enacting plans to
ensure the accuracy, completeness, and timeliness of NSLDS data. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:1.1

Recommendation:  Analyze student aid data more closely to identify
patterns of noncompliance with federal requirements, such as
following up on students identified as ineligible in the data
matches, and take appropriate corrective actions. 

Department action:  The Department is implementing the
recommendation.  Specifically, in August 1995, it established a
project team to review its application system and NSLDS data to
ensure that ineligible students are prevented from receiving new
loans and grants. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


   FEDERAL FAMILY EDUCATION LOAN
   INFORMATION SYSTEM:  WEAK
   COMPUTER CONTROLS INCREASE RISK
   OF UNAUTHORIZED ACCESS TO
   SENSITIVE DATA
   (GAO/AIMD-95-117, JUNE 12,
   1995)
-------------------------------------------------------- Appendix IV:2

Recommendation:  Develop and implement a computer security
administration program to oversee the Federal Family Education Loan
Program (FFELP) information system's computer security control
operations. 

Department action:  In August 1995, the Office of Postsecondary
Education's (OPE) Computer Security Office was given responsibility
for providing computer security oversight of FFELP.  In conjunction
with this action, in September 1995, broad institutional policies and
procedures that were part of OPE's Information Technology Security
Manual were adopted to cover FFELP. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:2.1

Recommendation:  Develop and require the FFELP information system's
contractor to implement policies and procedures to limit access
authorizations for system users to only those computer programs and
data needed to perform their duties and to approve the creation of
special user identifications. 

Department action:  The Department required its contractor to place
sensitive system data sets in a restricted library and sensitive
utility programs in a controlled library as of April 1, 1995.  In
addition, the FFELP Security Officer has performed periodic reviews
to ensure that inappropriate changes were not made to the sensitive
data sets.  Also, it formalized the process to create special user
identifications. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:2.2

Recommendation:  Identify sensitive data files and programs and
monitor successful access to them, including access by users having
special access privileges. 

Department action:  On April 28, 1995, the Department implemented
security procedures to monitor/review FFELP system access by system
programmers.  In addition, on September 30, 1995, it procured a new
audit software product to help detect unauthorized changes to FFELP
relational databases. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:2.3

Recommendation:  Require the FFELP information system's contractor to
devise controls to ensure that only approved and tested changes are
made to the system software. 

Department action:  In April 1995, the Department reemphasized to the
contractor the ongoing requirement that all proposed system software
changes be documented, tested, and approved before implementing
changes.  Failure to adhere to this will result in sanctions being
imposed on the contractor.  In addition, the Department started to
provide contractor oversight through the weekly configuration control
board meetings. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


   FINANCIAL AUDIT:  FEDERAL
   FAMILY EDUCATION LOAN PROGRAM'S
   FINANCIAL STATEMENTS FOR FISCAL
   YEARS 1993 AND 1992
   (GAO/AIMD-94-131, JUNE 30,
   1994)
-------------------------------------------------------- Appendix IV:3

Recommendation:  Perform periodic analyses to determine whether
lenders are submitting billing reports promptly, within 90 days after
the end of the quarter.  These analyses should include follow-up
procedures with individual lenders who have not promptly submitted
billing reports. 

Department action:  The Department has, for the past 3 years,
deactivated lenders that failed to submit billing reports for four
quarters.  Effective December 1994, the Department further reduced
the billing requirement to two quarters.  Lenders and their guaranty
agencies are notified of the deactivation after nonreceipt of the
lender's billing for two quarters.  To be reactivated, lenders must
request their guaranty agency to contact the Department and provide
documentation of the reason for reactivation. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:3.1

Recommendation:  Clearly identify security responsibilities and
oversight for the Department's general ledger system, including
appointing a security officer with responsibilities for the overall
security of the system. 

Department action:  The Department has hired a security officer
responsible for the overall security of the general ledger system. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:3.2

Recommendation:  Require and ensure that security administrators and
supporting technical staff who are responsible for the general ledger
system have security training. 

Department action:  Staff officers responsible for the general ledger
system were given 2 days of training in August 1995.  Additional
training is planned during 1996. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


   STUDENT LOANS:  MILLIONS LOANED
   INAPPROPRIATELY TO U.S. 
   NATIONALS AT FOREIGN MEDICAL
   SCHOOLS (GAO/HEHS-94-28, JAN. 
   21, 1994)
-------------------------------------------------------- Appendix IV:4

Recommendation:  Improve the standards and processes used to
determine the eligibility of foreign medical schools. 

Department action:  The Secretary established an advisory panel of
medical experts, the National Committee on Foreign Medical Education
and Accreditation (NCFMEA), to carry out its statutory mandate to
determine whether the approval and accreditation standards and
processes used by foreign countries are comparable with those in the
United States.  On April 28, 1994, regulations were issued that
established standards that foreign medical schools must meet to
participate in FFELP.  The Department expects that the regulatory
standards will be implemented during a recertification process for
foreign medical schools as soon as the comparability determinations
are made by NCFMEA and the policy decisions presented in the paper
mentioned above are finalized.  Until these actions are finalized, an
assessment cannot be made. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:4.1

Recommendation:  Establish policies and procedures to help ensure
that FFELP loans are made only to students attending medical programs
that meet the Department's standards. 

Department action:  The Department is drafting a position paper for
the Assistant Secretary for Postsecondary Education's approval of the
Department's process for recognizing foreign medical schools.  Until
the new process is approved, an assessment cannot be conducted. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix IV:4.2

Recommendation:  Require that foreign medical schools demonstrate
that they have formal affiliation agreements with the facilities they
use to train their students and their training facilities are
equivalent to those that educate U.S.  medical students. 

Department action:  The Department is drafting a position paper for
the Assistant Secretary for Postsecondary Education's approval of the
Department's process for recognizing foreign medical schools. 
According to Department officials, the new application requests
information that will ensure the Department's regulatory standards
are met.  Until the new process is approved, an assessment cannot be
conducted. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix IV:4.3

Recommendation:  Establish criteria for triggering site visits to
schools' campuses and clinical training facilities to review the
schools' operations and facilities and verify information. 

Department action:  The Department has developed and implemented
criteria to trigger site visits to foreign medical schools.  Since
that time, the Department has conducted several site visits and is
currently taking action to withdraw the eligibility of some of these
schools. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:4.4

Recommendation:  Establish formal policies and procedures for the
process of approving foreign medical schools. 

Department action:  The Department will develop internal procedures
for the review and approval of foreign medical schools.  A revised
application process for these schools' participation in title IV
programs will be developed.  Until the new application process is
approved, an assessment cannot be conducted. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix IV:4.5

Recommendation:  Develop appropriate guidance for lenders and
guaranty agencies through a weekly status report listing all changes
in schools' status. 

Department action:  The Department provides notification and guidance
to lenders and guaranty agencies through a weekly status report
listing all schools' status. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:4.6

Recommendation:  Ensure that approving officials are knowledgeable
and staff are properly supervised. 

Department action:  The Department created a separate team
responsible for approving foreign schools.  A determination cannot be
made without further work to assess staff responsibilities and
supervision. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix IV:4.7

Recommendation:  Require applicants for loans to identify when they
plan to attend a foreign medical school. 

Department action:  The Department disagreed with identifying foreign
medical schools on the student's application, indicating that it will
identify foreign medical schools through the school application
process and assign an OPE number with the addition of a suffix to
indicate a medical school. 

GAO's conclusion about status of action:  None taken

GAO's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix IV:4.8

Recommendation:  In cases of schools not cooperating with the
Department in providing information, exercise its authority to
prevent or terminate their continued eligibility in FFELP. 

Department action:  The Department has regulations stating that the
failure of a foreign medical school to provide, release, or authorize
release of information required will render the school ineligible to
apply for participation in FFELP. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:4.9

Recommendation:  Share information that the Department obtains on
foreign medical schools with state medical boards for their use in
evaluating the education of licensure applicants. 

Department action:  The Department plans to provide the Federation of
State Medical Boards (FSMB) a list of approved foreign medical
schools and the countries where they are located following the
September 1996 NCFMEA meeting. 

GAO's conclusion about status of action:  Planned

GAO's conclusion about whether the action generally addressed the
recommendation:  No


----------------------------------------------------- Appendix IV:4.10

Recommendation:  Work with FSMB to determine that information that
the Department gathers would be most useful to the state boards. 

Department action:  The Department has begun to determine what
information it believes FSMBs need and will provide that information
when its work is completed.  Until the Secretary approves the new
process, an assessment cannot be conducted. 

GAO's conclusion about status of action:  Planned

GAO's conclusion about whether the action generally addressed the
recommendation:  No


   FINANCIAL MANAGEMENT: 
   EDUCATION'S STUDENT LOAN
   PROGRAM CONTROLS OVER LENDERS
   NEED IMPROVEMENT
   (GAO/AIMD-93-33, SEPT.  9,
   1993)
-------------------------------------------------------- Appendix IV:5

Recommendation:  Develop a comprehensive strategy for determining the
accuracy of information reported on lenders' quarterly billings. 

Department action:  In March 1995, the Department's OIG issued its
lender audit guide, which requires an independent public accountant
(IPA) to perform an examination-level attestation relative to the
lender management's assertions about certain compliance requirements
concerning information reported on its quarterly billings. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:5.1

Recommendation:  Monitor and follow up with lenders whose quarterly
billings fail to meet the Department's internal automated edit checks
and reasonability tests. 

Department action:  The Department developed reasonability edits in
FFELP subsystems to compare billing data reported on the Department's
Form 799 and data submitted to NSLDS.  Once the edits and level of
reasonableness are finalized in April 1997, the Department will
analyze the variances and forward the results to the Guaranty Agency
and Lender and Oversight Service (GLOS) for follow-up. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:5.2

Recommendation:  Develop and implement procedures for converting
major automated systems, including a requirement that parallel
systems be run for an appropriate time period, to ensure that new
systems are properly processing program data. 

Department action:  The Department directed that adequate time be
given to testing system conversions and that all contracts include a
parallel systems testing period. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


   DEPARTMENT OF EDUCATION: 
   LONG-STANDING MANAGEMENT
   PROBLEMS HAMPER REFORMS
   (GAO/HRD-93-47, MAY 28, 1993)
-------------------------------------------------------- Appendix IV:6

Recommendation:  Enhance management leadership throughout the
Department and strengthen agency culture. 

Department action:  The Secretary has initiated efforts to build a
spirit of teamwork among political and career officials and to
encourage a free flow of ideas on how best to address management
problems in the Department. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:6.1

Recommendation:  Create, for information, financial, and human
resources management, strategic visions and strategic plans that are
integrated with the Department's overall strategic plans and
coordinated with the Department's comprehensive strategic management
process. 

Department action:  The Department (1) implemented its strategic and
tactical plans for information technology resources, (2) established
a committee to address problems in data collection and dissemination,
and (3) refined its financial management strategic plan. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


   FINANCIAL AUDIT:  GUARANTEED
   STUDENT LOAN PROGRAM'S INTERNAL
   CONTROLS AND STRUCTURE NEED
   IMPROVEMENT (GAO/AIMD-93-20,
   MAR.  16, 1993)
-------------------------------------------------------- Appendix IV:7

Recommendation:  Require that guaranty agencies and lenders annually
provide the Department an IPA'S positive attestation on the claims
for payment submitted to the federal government, and the basis for
such attestation, including an opinion on the adequacy of internal
controls over such claims. 

Department action:  In March 1995, the Department's OIG issued its
lender audit guide, which requires an IPA to perform an
examination-level attestation relative to the lender management's
assertions about certain compliance requirements concerning
information reported on its quarterly billings.  OIG is updating the
guaranty agency audit guidance.  This update is expected to be
completed by June 1996 for implementation on fiscal year 1996 single
audits.  A separate guaranty agency audit guide will not be issued by
the Department. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.1

Recommendation:  Test billings from guaranty agencies and lenders as
part of the Department's internal reviews. 

Department action:  A manual process has been developed matching
billing data reported by guaranty agencies with data reported in
NSLDS.  The Department is currently monitoring the top five guaranty
agencies.  In addition, a task order has been completed that put in
place the capability for the Department to match lender billings with
data reported in NSLDS.  The Department anticipates completing the
entire project by April 1997. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.2

Recommendation:  Require staff to follow up on questioned costs and
other amounts owed on the basis of reviews of guaranty agencies and
lenders within a designated time period from the time findings are
reported. 

Department action:  The Department is assessing its efforts to follow
up on questioned costs and other amounts owed to the Department. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.3

Recommendation:  Study the feasibility of requiring guaranty agencies
to standardize their FFELP loan accounting systems. 

Department action:  The Department concurred in the goal of this
recommendation.  It believes, however, that because some guaranty
agencies are departments within state governments and must follow
state accounting procedures, to require the guaranty agencies to use
a standard loan accounting system would not be feasible.  In
addition, with the current number of guaranty agencies, this
recommendation is not practical.  However, if the number of guaranty
agencies were to be reduced to a manageable level, the Department
would pursue the implementation of standardized accounting systems. 

GAO's conclusion about status of action:  None taken

GAO's conclusion about whether the action generally addressed the
recommendation:  No


------------------------------------------------------ Appendix IV:7.4

Recommendation:  Reassess and, if appropriate, adjust NSLDS
implementation date after completion of a detailed system design. 

Department action:  NSLDS' design was completed, and the system was
implemented in November 1994. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.5

Recommendation:  Develop written procedures detailing the methodology
to be used to derive the estimate of loan guarantee subsidies and
requiring that each year's estimate be fully documented and approved
by the Department's chief financial officer. 

Department action:  During 1993, the Department developed written
procedures detailing the methodology used to derive the estimate of
loan guarantee subsidies. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.6

Recommendation:  Establish and maintain subsidiary ledgers for FFELP. 

Department action:  The Department issued a task order to the FFELP
contractor to develop auditable subsidiary ledgers.  However, the
technical and business proposals were unacceptable to the Department. 
Consequently, the Department modified its approach to buy a
commercial off-the-shelf package that will considerably reduce the
cost of the effort.  The Department anticipates completing this
effort in December 1997. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.7

Recommendation:  Develop procedures to ensure that the general ledger
is periodically reconciled to subsidiary records maintained by OPE. 

Department action:  The Department will develop and implement
reconciliation procedures to coincide with its revised approach to
purchase a commercial off-the-shelf software package for FFELP
subledger development.  It expects to complete efforts by December
1997. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.8

Recommendation:  Establish an acceptance testing group responsible
for independently testing FFELP application system changes before
implementation. 

Department action:  In March 1994, the Department established
acceptance testing groups. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:7.9

Recommendation:  Implement procedures to ensure that internal control
reviews and risk assessments of the FFELP information systems are
performed periodically as required by OMB Circulars A-123, Internal
Control Systems; A-127, Financial Management Systems; and A-130,
Management of Federal Information Resources. 

Department action:  In June 1994, the Department developed procedures
to ensure that all FFELP systems are reviewed and risk assessments
performed as required by regulations. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix IV:7.10

Recommendation:  Implement controls described in the Department's
Automated Data Processing Technical Controls Handbook to ensure that
all data received from guaranty agencies and lenders are consistent
and accurate. 

Department action:  The Department implemented controls described in
the Technical Controls Handbook to assist in ensuring that all data
received from guaranty agencies and lenders are consistent and
accurate. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix IV:7.11

Recommendation:  Enhance the existing computer disaster recovery plan
to include contingency options at Department headquarters and
regional offices regarding key original documents. 

Department action:  The Department has established an improved
disaster recovery plan to include having key documents sent directly
to the Department's information system contractor for storage and
requiring that all key documents be photocopied before being sent to
the contractor. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix IV:7.12

Recommendation:  Require that the security administrator and
appropriate supporting technical staff have formal training in the
specific operating systems and access control software used by FFELP
contractor. 

Department action:  In September 1994, the FFELP security
administrator completed training on both the operating system and
access control software used by the FFELP contractor. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


----------------------------------------------------- Appendix IV:7.13

Recommendation:  Develop a comprehensive plan for revising the role
of guaranty agencies and the manner in which they are compensated. 

Department action:  The continuance of the Federal Direct Student
Loan Program, which has allowed the Department to implement direct
loans to student borrowers, is being assessed by the Congress.  If
fully implemented, the need for guaranty agencies would diminish. 
The Department is also reviewing the role of guaranty agencies in the
current environment and has a test case in progress involving one
guaranty agency.  Using this model, guaranty agencies will be
compensated for efforts to avoid defaults, particularly in the
preclaims area.  This experiment should be in place by June 1996,
pending approval by OMB.  If successful, the Department plans to
expand it to other guaranty agencies. 

GAO's conclusion about status of action:  In progress

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


   DEPARTMENT OF EDUCATION: 
   MANAGEMENT COMMITMENT NEEDED TO
   IMPROVE INFORMATION RESOURCES
   MANAGEMENT (GAO/IMTEC-92-17,
   APR.  20, 1992)
-------------------------------------------------------- Appendix IV:8

Recommendation:  Develop a departmentwide information resources
management (IRM) strategy and plan that is linked to overall
Department goals and objectives. 

Department action:  The Department prepares annual departmentwide
strategic plans and tactical IRM plans.  The Department's plans are
blueprints that support the improvement and development of
information systems and improve the capabilities employees require to
carry out the Department's mission and to achieve its goals. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes


------------------------------------------------------ Appendix IV:8.1

Recommendation:  Direct the senior IRM official to develop, in
conjunction with the Department's key operating components, an
effective departmentwide information planning process that meets
federal guidance. 

Department action:  The Department established and activated the
Information Management Committee and combined this effort with its
strategic planning process.  The committee developed a survey to
collect the data required to create a departmental database and
established and expanded its contacts with the national interest
groups concerned with the problems of data element standardization
and the electronic transfer of information.  These activities will
continue indefinitely. 

GAO's conclusion about status of action:  Complete

GAO's conclusion about whether the action generally addressed the
recommendation:  Yes




(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
EDUCATION
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)


STAFF ACKNOWLEDGMENTS
========================================================== Appendix VI

The following team members also contributed to this report:  Scott M. 
Berger and Joel R.  Marus, Evaluators; Julian P.  Klazkin, Senior
Attorney; and Laurel H.  Rabin, Communications Analyst. 


RELATED GAO PRODUCTS
=========================================================== Appendix 0

Student Financial Aid:  Data Not Fully Utilized to Identify
Inappropriately Awarded Loans and Grants (GAO/HEHS-95-89, July 11,
1995). 

Student Financial Aid:  Data Not Fully Utilized to Identify
Inappropriately Awarded Loans and Grants (GAO/T-HEHS-95-1995, July
12, 1995). 

Federal Family Education Loan Information System:  Weak Computer
Controls Increase Risk of Unauthorized Access to Sensitive Data
(GAO/AIMD-95-117, June 12, 1995). 

High Risk Series:  Student Financial Aid Programs (GAO/HR-95-10, Feb. 
95). 

Financial Audit:  Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131, June 30,
1994). 

Student Loans:  Millions Loaned Inappropriately to U.S.  Nationals at
Foreign Medical Schools (GAO/HEHS-94-28, Jan.  21, 1994). 

Financial Management:  Education's Student Loan Program Controls Over
Lenders Need Improvement (GAO/AIMD-93-33, Sept.  9, 1993). 

Direct Student Loans:  The Department of Education's Implementation
of Direct Lending (GAO/HRD-93-26, June 10, 1994). 

Financial Audit:  Guaranteed Student Loan Program's Internal Controls
and Structure Need Improvement (GAO/AFMD-93-20, Mar.  16, 1993). 

Department of Education:  Long-Standing Management Problems Hamper
Reforms (GAO/HRD-93-47, May 28, 1993). 

Department of Education:  Management Commitment Needed to Improve
Information Resources Management (GAO/IMTEC-92-17, Apr.  20, 1992). 


*** End of document. ***