This is the accessible text file for GAO report number GAO-02-1030R entitled 'The Department of Education’s Compliance with the Inflation Adjustment Act' which was released on August 26, 2002. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. United States General Accounting Office: Washington, DC 20548: August 26, 2002: The Honorable Roderick R. Paige: The Secretary of Education: Subject: The Department of Education’s Compliance with the Inflation Adjustment Act: Dear Mr. Secretary: Earlier this year, we initiated a governmentwide review of the implementation of the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended (Inflation Adjustment Act). [Footnote 1] The Inflation Adjustment Act required each federal agency to issue a regulation adjusting its covered maximum and minimum civil monetary penalties for inflation by October 23, 1996, and requires them to make necessary adjustments at least once every 4 years thereafter. During our review, the Department of Education’s (Education) Office of General Counsel indicated that at least eight of the agency’s civil penalties are covered by the act, but the agency had not adjusted any of them for inflation. This report is intended to bring this matter to your attention and to recommend corrective action. The Department of Education Identified at Least Eight Civil Penalties That Are Covered by the Inflation Adjustment Act: Section 3 of the Inflation Adjustment Act defines a covered civil penalty as any “penalty, fine, or other sanction that … is for a specific monetary amount as provided by Federal law” or “has a maximum amount provided for by Federal law,” and “is assessed or enforced by an agency pursuant to Federal law” and “is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.” Education’s Office of General Counsel provided us with a list of civil penalties that it considered covered by the Inflation Adjustment Act. Table 1 lists those penalties as well as their maximum penalty amounts, assessment methods, and the years that the penalties were last set or adjusted. Table 1: Department of Education’s Civil Penalties Covered by the Inflation Adjustment Act: U.S.C. citation: 20 U.S.C. 1015(c)(5); Description of violation: Failure by an institution of higher education to provide information on the cost of higher education to the Commissioner of Education Statistics; Maximum penalty amount: $25,000; Assessment method: For each failure; Year penalty was last set or adjusted: 1998. U.S.C. citation: 20 U.S.C. 1027(f)(3); Description of violation: Failure by an institution of higher education to provide information to the state and the public regarding its teacher-preparation programs in a timely or accurate manner; Maximum penalty amount: $25,000; Assessment method: For each failure; Year penalty was last set or adjusted: 1998. U.S.C. citation: 20 U.S.C. 1082(g); Description of violation: Violations by lenders and guaranty agencies of Title IV-B of the Higher Education Act, which authorizes the Federal Family Education Loan Program; Maximum penalty amount: $25,000; Assessment method: For each violation, failure, or misrepresentation; Year penalty was last set or adjusted: 1986. U.S.C. citation: 20 U.S.C. 1094(c)(3)(B); Description of violation: Violations of Title IV of the Higher Education Act, which authorizes various programs of student financial assistance; Maximum penalty amount: $25,000; Assessment method: For each violation or misrepresentation; Year penalty was last set or adjusted: 1986. U.S.C. citation: 31 U.S.C. 1352(c)(1); Description of violation: Violations regarding the limitation on the use of appropriated funds to influence certain federal contracting and financial transactions; Maximum penalty amount: $100,000[A]; Assessment method: For each expenditure; Year penalty was last set or adjusted: 1989. U.S.C. citation: 31 U.S.C. 1352 (c)(2)(A); Description of violation: Violations regarding the failure to file or to amend declarations relating to lobbying activities; Maximum penalty amount: $100,000[A]; Assessment method: For each failure to file or amend a required declaration; Year penalty was last set or adjusted: 1989. U.S.C. citation: 31 U.S.C. 3802 (a)(1); Description of violation: Violation of the Program Fraud Civil Remedies Act; Maximum penalty amount: $5,000; Assessment method: For each false claim; Year penalty was last set or adjusted: 1986. U.S.C. citation: 31 U.S.C. 3802 (a)(2); Description of violation: Violation of the Program Fraud Civil Remedies Act; Maximum penalty amount: $5,000; Assessment method: For each false written statement; Year penalty was last set or adjusted: 1986. [A] The statutory minimum penalty for these violations is $10,000. Source: Department of Education’s Office of General Counsel. [End of table] The Department of Education Has Not Adjusted Its Covered Civil Penalties for Inflation: Under the Inflation Adjustment Act, Education (like other covered federal agencies) was required to publish a regulation by October 23, 1996, adjusting its maximum civil penalties for inflation. The amount of this adjustment was to be based on changes in the Consumer Price Index (CPI) from June of the calendar year in which Education’s penalties were last set or adjusted through June of the year prior to the adjustment (i.e., June 1995 for adjustments made in October 1996). However, the statute limited the first adjustments of an agency’s penalties to 10 percent of the penalty amounts. Six of the penalties in table 1 were enacted before 1996, and the CPI had increased by more than 10 percent since those six penalties were last set or adjusted. Therefore, Education should have published a regulation in the Federal Register by October 23, 1996, increasing those six penalties by 10 percent. [Footnote 2] The Inflation Adjustment Act also required Education to examine its civil penalties by October 23, 2000, and, if necessary, make additional inflation adjustments. The calendar year 2000 adjustments were to be based on changes in the CPI from June of the year in which the penalties were last adjusted (e.g., June 1996 for the six penalties that should have been adjusted by 10 percent) through June of the year prior to the adjustment (June 1999). If Education had adjusted six of its penalties in 1996, the department could have increased those penalties again in 2000. However, our review of the Federal Register for calendar years 1996 through 2001 did not reveal any Education regulations that increased the agency’s civil penalties for inflation. Education’s Deputy General Counsel for Departmental and Legislative Service confirmed that Education had not published any penalty adjustment regulations pursuant to the Inflation Adjustment Act. Recommendation for Executive Action: We recommend that the Secretary of Education initiate a regulatory action to adjust for inflation all of the agency’s civil penalties that are covered by the Inflation Adjustment Act. Agency Comments and Our Evaluation: On August 15, 2002, we provided a draft of this report to the Secretary of Education for his review and comment. On August 21, 2002, the Department of Education’s General Counsel provided GAO with written comments on the draft report, which are reproduced in the enclosure. The General Counsel said that Education had benefited greatly from the information we have provided on this issue and that it will soon initiate the appropriate regulatory process to adjust for inflation all of its civil penalties that are covered by the Inflation Adjustment Act. The General Counsel also indicated that the time to adjust two 1998 penalties has not expired, and that our report should indicate that the Department has not failed to comply with the Inflation Adjustment Act concerning these two penalties. We deleted the sentences that referred to these penalties and added a footnote to the report indicating that not enough inflation had occurred to permit Education to adjust those penalties. We are sending copies of this report to the appropriate congressional committees, and it will be available at no charge on GAO’s website at [hyperlink, http://www.gao.gov]. If you or your staff have any questions on the matters discussed in this letter, you may contact Curtis Copeland or me at (202) 512-6806. Major contributors to this report include John Tavares and Oliver Walker. Sincerely yours, Signed by: Victor S. Rezendes: Managing Director: Strategic Issues: Enclosure: [End of correspondence] Enclosure: Comments from the Department of Education: United States Department Of Education: Office Of The General Counsel: 400 Maryland Ave., SW: Washington, D.C. 20202-2110: "Our mission is to ensure equal access to education and to promote educational excellence throughout the Nation." August 20, 2002: Mr. Victor S. Rezendes: Managing Director: Strategic Issues: U.S. General Accounting Office: Washington, D.C. 20548: Dear Mr. Rezendes: We appreciate the opportunity to comment on your report concerning the Department of Education's compliance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended (Inflation Adjustment Act). We have benefited greatly from the information your office provided us regarding the Department's obligations under the Inflation Adjustment Act. As your report notes, there are several civil penalties that we consider to be covered by the Inflation Adjustment Act which have not been adjusted for inflation. Six of the penalties were enacted before 1996 and should have been adjusted by regulation by October 23, 1996. Those same six penalties should have been examined and adjusted again by October 23, 2000 — four years after the prior adjustment. An additional two penalties that were enacted in 1998 should be adjusted for the first time this year. Because the time in which the Department has to adjust these two additional penalties has not yet expired, we ask that the following sentences on page 3 of the report be deleted, as they imply that the Department has failed to comply with the Inflation Adjustment Act with respect to these two additional penalties: "In addition, Education could have also adjusted two penalties in table 1 that were established in 1998. The CPI increased by 2 percent between June 1998 and June 1999." The Department takes very seriously its obligation to abide by statutory requirements and, therefore, regrets that it did not take action required of it in 1996 and 2000. We have taken action to remedy our oversight and will soon initiate the appropriate regulatory process to adjust for inflation all of the Department's civil penalties that are covered by the Inflation Adjustment Act. Sincerely, Signed by: Brian W. Jones: [End of enclosure] Footnotes: [1] The Inflation Adjustment Act is codified at 28 U.S.C. 2461 note. The 1990 act was amended in 1996 by the Debt Collection Improvement Act, which added the requirement for agencies to adjust their civil penalties by regulation (Pub. L. 104-134, Sec. 31001, 110 Stat. 1321- 373). [2] As of August 2002, not enough inflation had occurred to allow Education to adjust its two penalties that were established in 1998. [End of section] GAO’s Mission: The General Accounting Office, the investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. 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