OIG: ED in Compliance for Reporting Improper Payments, But Fails to Provide Reliable Estimates

By Owen Daugherty, NASFAA Staff Reporter

The Department of Education's (ED) Office of Inspector General (OIG) issued a report this week examining ED's compliance with federal reporting requirements for improper payments, finding that while the department was in compliance with all six reporting requirements, it published improper payment estimates that were unreliable for several financial aid programs.

The programs in question administered by the Office of Federal Student Aid (FSA) in its fiscal year 2019 Agency Financial Report (AFR) included the Pell Grant, the William D. Ford Federal Direct Loan, and the Temporary Emergency Impact Aid for Displaced Students programs, according to the report from OIG.

While ED did meet all six requirements under the Improper Payments Elimination and Recovery Act of 2010 (IPERA), its improper payment estimation methodologies and the estimates it produced for the programs listed above were “not accurate, complete, and statistically valid,” the report found.

To be in compliance with IPERA, federal agencies must review their programs susceptible to improper payments, publish performance reports on those programs, conduct risk assessments, reduce improper payments to less than 10%, and meet annual reduction targets, among other requirements.

Though OIG did note that ED implemented corrective actions that could prevent and reduce improper payments for the Pell Grant and Direct Loan programs, OIG wrote that it could not evaluate ED’s performance in preventing and reducing improper payments because the department did not measure the effectiveness of its corrective actions.

However, the OIG did acknowledge ED’s role in pursuing passage of the FUTURE Act, which permits taxpayer data sharing between the Departments of Treasury and Education, as a corrective action toward preventing and reducing improper payments in the federal student aid programs.

“The Pell and Direct Loan programs’ improper payment estimation methodologies were not statistically valid because student-level sampling for some compliance audits, used to calculate the estimates, were based on nonrandom samples which would impact the ability to project a reliable statistical estimate,” OIG wrote.

Additionally, OIG could not accurately evaluate ED’s performance in recapturing

improper payments for its programs and activities because it could not compare ED’s 27% recapture rate for fiscal year 2019 to the 129% recapture rate it reported in fiscal year 2018 because OIG’s 2018 audit found significant issues with the accuracy of that year’s reported recapture rate.

As for the Emergency Impact Aid program, ED reported inaccurate and incomplete total program outlays and improper payments that it identified in the Payment Integrity section of the AFR, according to OIG.

Other information ED reported in the section, such as the sources of improper payments, the root causes of improper payments, and the amounts of improper payments identified and recaptured in all the department’s programs and activities, was generally accurate and complete, OIG found.

In its annual report published in November, OIG envisioned ED could continue to struggle with improper payments and oversight and monitoring within FSA, but noted it will be reassessing whether these issues persist as ED works to improve its correction plans for improper payments.

In the report published this week, OIG recommended that ED develop and implement procedures to ensure its Pell Grant, Direct Loan, and Emergency Impact Aid programs are accurate, complete, and statistically valid and that its improper payment estimates for programs are based on and represent quality information. Lastly, OIG recommended that  improper payments are appropriately identified and included in the improper payment estimate for the Emergency Impact Aid program.

ED in response generally disagreed with OIG’s findings that the improper payment methodologies for the Pell Grant and Direct Loan programs were not statistically valid.

ED said the methodologies were based on data obtained through compliance audits, and that it “determined that compliance audits provided the best available data because they were performed by auditors following auditing standards and reporting requirements.”

Additionally, ED refuted OIG’s assertion that it used inaccurate data in its Direct Loan

calculations, stating that “the use of loan origination data was deliberate,” a response OIG accepted and made revisions accordingly.

ED did agree with OIG’s finding that it didn’t accurately and completely record improper payments used to calculate estimates for the Pell Grant and Direct Loan programs.


Publication Date: 7/17/2020

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