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 21, 1995                                      (202) 401-0774

Education Department Inspector General Reports to Congress

"The inspector general is an invaluable partner in our ongoing efforts to be a model federal department," said U.S. Education Secretary Richard W. Riley. "We are the smallest cabinet-level agency and that means we have to work harder and work smarter. The IG's office is consistently a place we turn to for recommendations, counsel and reliable information."

For example, the inspector general conducted the first audit of the new Direct Student Loan Program. Under direct lending, the federal government issues loans to students through schools, bypassing the more than 7,500 private lenders, 45 guaranty agencies and 90 secondary market participants that make up the old Federal Family Education Loan Program (FFEL). Department estimates show that accelerating the move to direct lending would save taxpayers some $12 billion by the year 2000.

"Independent auditors, retained by the OIG, issued a 'clean' opinion on the direct loan program's financial statements," said Deputy Education Secretary Madeleine M. Kunin, who oversees the department's new management initiatives. "This provided reliable, independent verification that we are succeeding in our efforts to improve efficiency and customer service. We're pleased because the students and taxpayers are the ones who benefit."

Also related to student aid, OIG investigative efforts uncovered fraud primarily within the FFEL program, resulting in 67 convictions. For example, John C. Dunston, former owner of Hawaii Transportation Systems, Inc., was ordered to make restitution of $407,798 in student aid funds and serve 33 months in jail.

The report also cites congressional testimony given by the inspector general, suggesting that self-enforcing mechanisms may be more effective than regulations in policing some federal programs. An example is the "85-15 Rule," passed by Congress in 1992, which requires that proprietary schools receive at least 15 percent of their revenue from sources other than Title IV federal student aid. Thus, inferior schools, unable to attract students in the marketplace, may be dropped from participation in the federal student loan and grant programs. Congress has postponed the effective date of this provision until July 1, 1995.

Acting Inspector General John P. Higgins Jr. also told the Congress that in light of Riley's National Family Involvement Partnership for Learning, the OIG prepared an advisory report entitled, "Increasing Parental Involvement: Spotlight on Teacher Training." The OIG found many state education agencies do not require teachers to take courses or demonstrate proficiency in skills related to increasing the involvement of parents in their children's education.

The report, covering the period from October 1, 1994 through March 31, 1995, is required by the Inspector General Act of 1978 (P.L. 95-452, as amended).

Copies may be obtained by writing Semiannual Report, U.S. Department of Education, Office of Inspector General, 600 Independence Avenue, S.W., Washington, D.C. 20202-1510.