A r c h i v e d  I n f o r m a t i o n

     FOR RELEASE                                 Contact: Rodger D. Murphey      June 4, 1996                                         (202) 401-1576

"Working with department officials and state and local education agencies, the Office of Inspector General (OIG) plays a meaningful role in the nation's efforts to improve its education programs and the performance of students," Bloom said, sending his semiannual report to Congress. "We have developed a program of cooperative efforts to accomplish this goal."

The OIG is currently working on projects designed to assist the department and Congress in the upcoming reauthorization of the Rehabilitation Act and the Elementary and Secondary Education Act (ESEA).

With regard to the Rehabilitation Act, a series of audits is underway to address key issues developed with program officials and in consultation with Congressional staff during a comprehensive program survey.

The OIG is also working with program managers and staff, as well as with state and local officials, to identify issues that will be the focus of audits over the next two years in preparation for the reauthorization of ESEA in 1999.

In another effort, the Cooperative Audit Resolution and Oversight Initiative (CAROI) is working to improve education programs and student performance through better use of audits, monitoring and technical assistance. The Department CAROI team -- consisting of employees in the Office of Elementary and Secondary Education, Office of the Chief Financial Officer, and Office of General Counsel, as well as OIG -- has established a partnership with CAROI teams in the states of Florida, Mississippi and Washington.

Other cooperative efforts include working with the Office of Management and Budget (OMB) and the General Accounting Office in making recommendations for revising OMB guidance and the Single Audit Act legislation, as well as for revising and updating OMB's compliance supplement for the Single Audit Act.

The OIG also led an interagency team in an examination of the peer review process, a project of the President's Council on Integrity and Efficiency (PCIE). The OIG-led team prepared a paper with recommendations on policy issues and provided it to the PCIE committee responsible for revision of the peer review guide.

Among the activities in postsecondary education:

• The OIG issued a series of reports on the department's debt collection activities. In one of these reports, OIG auditors assessed the cost-effectiveness of the department's initiative to target more than 800,000 defaulted borrowers' loans for consolidation into the Direct Loan program. The Inspector General concluded that it was not cost effective to consolidate these loans.

• An audit of Great Lakes Higher Education Corporation (GLHEC) found that reporting consolidated loans as collections allowed GLHEC to retain excessive Federal Consolidation Loan payments. The Inspector General recommended that the department instruct GLHEC to refund $1,012,000 and change the way it reports payments received in the consolidation of defaulted loans.

Among OIG investigations during the six-month period covered by the report:

• An investigation of the Temple School, Baltimore, Md., resulted in the conviction of five of its officers for student aid fraud.

• The owner of the California Institute, Long Beach, Calif., was arrested by an OIG agent after being charged with five counts of fraud. He was charged with illegally retaining $4.3 million in federal guaranteed student loans.

• A judgment of $9,494,224 was entered against American Career Training Corporation, Pompano Beach, Fla., for breach of contract and a judgment of $3,532,332 was entered against the owners for unjust enrichment. The lawsuit was based upon evidence that the defendants failed to pay refunds for students who had received federal guaranteed student loans and withdrew from the school.

• Recoveries from USA Training Academy, Newark, Del., as a part of a December 1993 settlement agreement resulting from a civil suit, reached $10 million during the reporting period covered by the semiannual report. The department is expected to recover a total of $14 million when the school's assets are completely liquidated.

The semiannual report is required by the Inspector General Act of 1978 (P.L. 95-452, as amended). Copies may be obtained by writing Semiannual Report to Congress, U.S. Department of Education, Office of Inspector General, 600 Independence Ave., S.W., Washington, D.C. 20202-1510.