The Office of Inspector General (OIG) gave the Department of Education a negative review in its semiannual report to Congress last month, but laid some of the blame back on Congress. The OIG found that the Department’s Federal Student Aid office (FSA) is struggling to effectively monitor, provide oversight, and demand accountability from its staff, program participants, and contractors. FSA oversees more than 6,000 postsecondary institutions, 3,000 lenders, 35 guaranty agencies, and other third-party servicers while disbursing $77 billion in funds annually.

Higgins placed some of the blame on Congress, saying the Department lacked the "resources necessary to identity and implement effective oversight and monitoring of its program participants."

Higgins also criticized the Department for having a "weak control environment" and for emphasizing "partnerships over compliance" with program participants. That criticism reinforces what some in Congress have said in recent months by questioning the "cozy" relationships between the Department and student loan providers.

According to the report, Department officials conceded that they "did not have sufficient staff with the qualifications and knowledge needed to monitor guaranty agencies, lenders, and other participants."

The OIG did give the Department positive marks on its oversight of the FAFSA verification process. In 2002, the OIG found that the Department was not adequately monitoring the effectiveness or extent to which schools complied with verification requirements. During their follow-up in this report the OIG found that the Department does have adequate procedures in place for evaluating the verification process, but suggested it also conduct additional program reviews and provide more technical assistance to ensure school compliance.

Other Findings

• Several schools are listed that have been investigated in the last six months where school officials were found to be involved in some sort of financial aid fraud or abuse.

• A lack of oversight over guaranty agencies in ensuring that funds from their operating fund correctly transferred over to their Federal Fund, which is the property of the federal government.

• Insufficient monitoring over FSA contracts that totaled more than $1.4 billion in fiscal year 2005. "FSA staff did not always follow established regulations, policies or procedures for nine out of the 10 contracts we reviewed," said the report.

By Justin Draeger
NASFAA Assistant Director for Communications

Posted 12/06/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.