The Department of Education's Compliance with the Inflation Adjustment Act
Gao ID: GAO-02-1030R August 26, 2002Earlier this year, GAO initiated a governmentwide review of the implementation of the Federal Civil Penalties Inflation Adjustment Act of 1990. The Inflation Adjustment Act requires 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 the review, the Department of Education's Office of the General Counsel indicated that at least eight of the agency's civil penalties are covered by that act, but the agency had not yet adjusted any of them for inflation.
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Director: J. Christopher Mihm Team: Government Accountability Office: Strategic Issues Phone: (202) 512-6082GAO-02-1030R, The Department of Education's Compliance with the Inflation Adjustment Act
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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]
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