House Subcommittees Scrutinize Improper Payments, FSA Performance Bonuses
Federal Student Aid (FSA) fielded sharp questions during yesterday’s House hearing on improper payments, where lawmakers questioned everything from how effectively the agency is addressing the issue to how senior leaders at FSA are awarded bonuses for performance.
was jointly held by the House Subcommittee on Government Operations and the Subcommittee on Intergovernmental Affairs, with the goal of evaluating the Department of Education’s (ED) progress in better estimating and preventing improper payments, and how recovery of such payments is done. The Inspector General at ED has repeatedly found FSA to be noncompliant with the Improper Payments Elimination and Recovery Act (IPERA) and has failed to accurately estimate improper payments.
The issue “doesn’t get enough attention and is critical for us to get right,” Subcommittee on Government Operations Chair Mark Meadows (R-NC) said in his opening remarks.
NASFAA President Justin Draeger testified before the committee
about FSA’s efforts to address improper payments, telling the subcommittees that while there has been progress in recent years, more can be done to address the issue in a way that eases the burden placed on students and institutions.
“One of the greatest challenges in dealing with improper payments within the federal student aid programs is that, in our efforts to drive down improper payments, we don’t simultaneously – and inadvertently – want to drive out the very students these programs are designed to help,” Draeger said.
For example, changes to the verification process “ended up being ridiculously complex and archaic” when it was decided that borrowers needed to obtain documentation from the Internal Revenue Service (IRS) verifying they did not file taxes via traditional mail, Draeger said. “If this issue really does need a fix, a better solution would be to have an electronic database match between the IRS and ED to confirm whether someone is a non-filer, a solution that was once under consideration, but has since been scrapped.”
Draeger also discussed how the IRS Data Retrieval Tool’s (DRT) outage is likely to cause more improper payments, as students and families “will face larger than necessary barriers in completing their applications.”
FSA Chief Financial Officer Jay Hurt – who replaced former Chief Operating Officer Jim Runcie as a witness following his late-night resignation on Tuesday – conceded that the DRT outage “will [have] some impact on improper payments,” but assured the subcommittees that the tool would be back online with a mass encryption solution by October 1. In the meantime, FSA is “using multiple avenues to assist the applicants” during the tool’s outage to advise them of alternative ways to obtain tax information, Hurt said.
While improper payments were the focus of the hearing, lawmakers also used the opportunity to vent their frustrations about FSA’s efficacy as a performance-based organization (PBO), its shortcomings in meeting its obligations to students, taxpayers, and other stakeholders, and what they described as mismanagement by senior level officials, namely the absent Runcie.
Runice, who resigned from his post late Tuesday night following a disagreement with ED Secretary Betsy DeVos about testifying at the hearing, had served as the head of FSA since September 2011, and was reappointed for a five-year term in 2015. His absence at the hearing was keenly noted by several lawmakers, including Rep. Jim Jordan (R-OH) who urged Meadows to subpoena Runcie to testify about his tenure at FSA.
Meadows said it is “appalling” that he exited before testifying, calling his resignation “a slap in the face to millions of taxpayers.” Meadows also criticized the performance bonuses Runcie received during his time at FSA, saying, “It seems like Mr. Runcie could be singing the song ‘Take the Money and Run.’”
While it is “very easy for us to start going after a new secretary,” many of the issues at FSA came about before DeVos took the position, Meadows said.
When questioned about how effective FSA is as a performance-based organization (PBO), Draeger cited a recent NASFAA report
that benchmarked FSA against other PBOs. The report found that other PBOs “have a unique quality that is just lacking at FSA, which is a specific oversight board,” Draeger said.
“If you’re going to give a federal agency private sector flexibility, then some of the private sector oversight needs to be there. And when you look at the other federal PBOs, they have that in place,” Draeger said.
When asked about program reviews and the whether the relationship between FSA and institutions is “adversarial,” Draeger cited the results of a 2016 NASFAA member survey
that showed 30 percent of institutions who had a program review in the last five years had not received a final report from FSA 12 months after the fact.
“If the goal is to correct improper payments but these just continue to hang out there ... schools feel like they’re under tremendous pressure with this perpetually hanging axe over institutional eligibility,” Draeger said.
Furthermore, the most cited words used by members to describe their relationship with FSA were “adversarial” and “complicated,” and 90 percent of the words used were negative, according to Draeger. And while this did not occur under Hurt’s leadership, Draeger explained to the subcommittee that since testifying at a 2015 hearing
about FSA as a PBO, Runcie “refused to take meetings with myself or my board of directors, who are acting financial aid administrators,” a statement that shocked Meadows.
“While the career staff at FSA have continued to enter dialogues, the secretary’s office in both administrations continued dialogue, the undersecretary’s office continued dialogue, we specifically requested meetings with the Chief Operating Officer [Runcie], which were denied,” Draeger said.
Meadows went on to tell FSA officials that he never wanted to “hear about government officials being unwilling to meet with key stakeholders” again. Meadows called on FSA to submit to the subcommittee a “corrective plan” that includes a matrix that determines performance bonuses for senior level officers, and asked ED’s Inspector General Kathleen Tighe to submit a list of her office’s top recommendations for improving improper payment efforts. Meadows gave both groups 45 days to complete the tasks.
Publication Date: 5/26/2017