[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
EXAMINING GAO'S FINDINGS ON EFFORTS
TO IMPROVE OVERSIGHT OF LOW-INCOME
AND MINORITY SERVING INSTITUTIONS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HIGHER EDUCATION,
LIFELONG LEARNING, AND COMPETITIVENESS
COMMITTEE ON
EDUCATION AND LABOR
U.S. House of Representatives
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, MAY 27, 2010
__________
Serial No. 111-66
__________
Printed for the use of the Committee on Education and Labor
Available on the Internet:
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COMMITTEE ON EDUCATION AND LABOR
GEORGE MILLER, California, Chairman
Dale E. Kildee, Michigan, Vice John Kline, Minnesota,
Chairman Senior Republican Member
Donald M. Payne, New Jersey Thomas E. Petri, Wisconsin
Robert E. Andrews, New Jersey Howard P. ``Buck'' McKeon,
Robert C. ``Bobby'' Scott, Virginia California
Lynn C. Woolsey, California Peter Hoekstra, Michigan
Ruben Hinojosa, Texas Michael N. Castle, Delaware
Carolyn McCarthy, New York Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts Judy Biggert, Illinois
Dennis J. Kucinich, Ohio Todd Russell Platts, Pennsylvania
David Wu, Oregon Joe Wilson, South Carolina
Rush D. Holt, New Jersey Cathy McMorris Rodgers, Washington
Susan A. Davis, California Tom Price, Georgia
Raul M. Grijalva, Arizona Rob Bishop, Utah
Timothy H. Bishop, New York Brett Guthrie, Kentucky
Joe Sestak, Pennsylvania Bill Cassidy, Louisiana
David Loebsack, Iowa Tom McClintock, California
Mazie Hirono, Hawaii Duncan Hunter, California
Jason Altmire, Pennsylvania David P. Roe, Tennessee
Phil Hare, Illinois Glenn Thompson, Pennsylvania
Yvette D. Clarke, New York [Vacant]
Joe Courtney, Connecticut
Carol Shea-Porter, New Hampshire
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Paul Tonko, New York
Pedro R. Pierluisi, Puerto Rico
Gregorio Kilili Camacho Sablan,
Northern Mariana Islands
Dina Titus, Nevada
Judy Chu, California
Mark Zuckerman, Staff Director
Barrett Karr, Republican Staff Director
------
SUBCOMMITTEE ON HIGHER EDUCATION,
LIFELONG LEARNING, AND COMPETITIVENESS
RUBEN HINOJOSA, Texas, Chairman
Timothy H. Bishop, New York Brett Guthrie, Kentucky,
Jason Altmire, Pennsylvania Ranking Minority Member
Joe Courtney, Connecticut John Kline, Minnesota
Paul Tonko, New York Michael N. Castle, Delaware
Dina Titus, Nevada Vernon J. Ehlers, Michigan
Robert E. Andrews, New Jersey Judy Biggert, Illinois
John F. Tierney, Massachusetts Bill Cassidy, Louisiana
David Wu, Oregon David P. Roe, Tennessee
Susan A. Davis, California Glenn Thompson, Pennsylvania
Mazie Hirono, Hawaii [Vacant]
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Pedro R. Pierluisi, Puerto Rico
C O N T E N T S
----------
Page
Hearing held on May 27, 2010..................................... 1
Statement of Members:
Guthrie, Hon. Brett, Senior Republican Member, Subcommittee
on Higher Education, Lifelong Learning, and Competitiveness 4
Prepared statement of.................................... 5
Hinojosa, Hon. Ruben, Chairman, Subcommittee on Higher
Education, Lifelong Learning, and Competitiveness.......... 1
Prepared statement of................................ 3
Additional submission:
McMillin, Sue, president and CEO, Texas Guaranteed
Student Loan Corp., prepared statement of.......... 33
Roe, Hon. David P., a Representative in Congress from the
State of Tennessee, question for the record................ 40
Statement of Witnesses:
Scott, George A., Director, Education, Workforce, and Income
Security, U.S. Government Accountability Office............ 6
Prepared statement of.................................... 8
Shireman, Robert M., Deputy Undersecretary, U.S. Department
of Education............................................... 15
Prepared statement of.................................... 16
Response to question for the record...................... 42
EXAMINING GAO'S FINDINGS ON EFFORTS
TO IMPROVE OVERSIGHT OF LOW-INCOME
AND MINORITY SERVING INSTITUTIONS
----------
Thursday, May 27, 2010
U.S. House of Representatives
Subcommittee on Higher Education,
Lifelong Learning, and Competitiveness
Committee on Education and Labor
Washington, DC
----------
The subcommittee met, pursuant to call, at 10:05 a.m., in
room 2175, Rayburn, Hon. Ruben Hinojosa [chairman of the
subcommittee] presiding.
Present: Representatives Hinojosa, Tonko, Davis, Fudge,
Guthrie, Biggert, and Roe.
Also Present: Representative Scott.
Staff Present: Jeff Appel, Senior Education Policy Advisor/
Investigator; Andra Belknap, Press Assistant; Calla Brown,
Staff Assistant, Education; Jose Garza, Deputy General Counsel;
Mike Kruger, Online Outreach Specialist; Sadie Marshall, Chief
Clerk; Ricardo Martinez, Policy Advisor, Subcommittee on Higher
Education, Lifelong Learning, and Competitiveness; Bryce
McKibben, Staff Assistant, Education; Alex Nock, Deputy Staff
Director; Kristina Peterson, Legislative Fellow, Education;
Julie Radocchia, Senior Education Policy Advisor; Alexandria
Ruiz, Administrative Assistant to Director of Education Policy;
Ajita Talwalker, Education Policy Advisor; Stephanie Arras,
Minority Legislative Assistant; Kirk Boyle, Minority General
Counsel; Amy Raaf Jones, Minority Higher Education Counsel and
Senior Advisor; Brian Newell, Minority Press Secretary; Susan
Ross, Minority Director of Education and Human Services Policy;
and Linda Stevens, Minority Chief Clerk/Assistant to the
General Counsel.
Chairman Hinojosa. A quorum being present, the committee
will come to order.
Pursuant to the committee rules, any member may submit an
opening statement in writing which will be made part of the
permanent record; and now I recognize myself, followed by
Ranking Member Guthrie, for an opening statement.
First, I would like to welcome my colleagues on both sides
of the aisle to this important hearing on examining GAO's
findings on efforts to improve oversight of minority serving
institutions.
I want to commend and recognize some of our colleagues on
the Education and Labor Committee for their leadership in
advancing the Student Aid and Fiscal Responsibility Act, known
as SAFRA, enacted as part of a Health Care and Education
Reconciliation Act of 2010. Since last fall, I have had the
pleasure of working closely with Representatives Bobby Scott,
Raul Grijalva, Dale Kildee, David Wu, as well as other members
of the Congressional TriCaucus to ensure that SAFRA included
targeted funding for Title III and Title V institutions.
I want to thank GAO for the release of their report
examining GAO's findings on efforts to improve oversight of
low-income students and minority serving institutions.
As many of you know, I have fought rigorously to increase
Federal resources to MSIs throughout my tenure in Congress.
Historically black colleges and universities, known as HBCUs,
and Hispanic serving institutions, known as HSIs, as well as
tribal colleges and universities and Alaska native serving
institutions or native Hawaiian serving institutions and
predominantly black institutions, as well as Asian American and
Native American Pacific Islander serving institutions and
Native American serving nontribal institutions are an
invaluable segment of our Nation's higher education system.
Each year they ensure access and affordability to millions of
minority and low-income students and workers.
Over the past 15 years or so, we have made significant
strides in addressing the funding gap for these institutions.
On March 30th, President Obama signed the Health Care and
Education Reconciliation Act of 2010, providing $2.55 billion
for Title III and Title V institutions. This is the largest
investment ever in HBCUs and HSIs.
At this time, I wish to acknowledge HBCUs for the
tremendous job they have done in educating a large portion of
our Nation's African American students. HBCUs prepare
exceptional leaders in the fields of medicine, in law, science,
technology, engineering, mathematics, teaching, and other areas
where minority students continue to be underrepresented.
According to the State of America's Black Colleges, HBCUs
graduate 40 percent of all African American students receiving
a 4-year STEM degree and 50 percent of African American
teachers. HBCUs play an extremely vital role in our Nation's
higher education system and serve as role models for other
institutions of higher learning.
We have also made substantial progress in supporting and
developing the capacity of Hispanic serving institutions, known
as HSIs. According to Excellencia in Education, a nonprofit
organization which promotes success for Latinos in higher ed,
HSIs enroll approximately half of all Latino undergraduates in
the United States.
In 1995, HSIs received an appropriation of only $12
million. That was the first time that they were funded. They
were one of a number of institutions receiving funding under
Title III. Then, in 1998, we were successful in creating a
separate title for HSIs to underscore the importance of these
institutions to our Nation's growing Latino community. In
fiscal year 2010, the developing Hispanic serving institutions
program received an appropriation of $117 million; and the
Promoting Post Baccalaureate Opportunities, our newly created
graduate program for HSIs, received an appropriation of $22
million.
I am very proud of what our committee has been able to
accomplish for all of our institutions of higher learning, and
as we build on our successes and set goals for the next decade
it is imperative that we have stronger mechanisms to monitor
these Federal programs. We must have increased accountability
and work with the United States Department of Education to
improve annual monitoring and reporting requirements. Our
students deserve the very best, and our institutions must
provide exemplary leadership in managing these resources
effectively. To achieve President Obama's goal of leading the
world in college graduates by 2020, we must ensure that MSIs
are doing their part to increase persistence, retention, and
completion rates of all students.
Based on the findings of the GAO report, four institutions
used grant funds improperly; and that is a serious concern for
me and for our committee. The GAO report is a great starting
point for today's hearing, and I hope that we can have a robust
discussion and learn more about these issues from our
distinguished witnesses.
With that, I say thank you; and I now yield to Ranking
Member Guthrie.
[The statement of Mr. Hinojosa follows:]
Prepared Statement of Hon. Ruben Hinojosa, Chairman, Subcommittee on
Higher Education, Lifelong Learning, and Competitiveness
I would like to welcome my colleagues, on both sides of the aisle,
to this important hearing on ``Examining GAO's Findings on Efforts to
Improve Oversight of Low-Income and Minority Serving Institutions.''
I want to recognize some of our colleagues on the Education and
Labor Committee for their leadership in advancing the Student Aid and
Fiscal Responsibility Act (SAFRA), enacted as part the Health Care and
Education Reconciliation Act of 2010.
Since last fall, I have had the pleasure of working closely with
Representatives Bobby Scott, Ra#l Grijalva, Dale Kildee, David Wu as
well as other members of the congressional tri-caucus to ensure that
SAFRA included targeted funding for Title III and Title V institutions.
I want to thank the GAO for the release of their report:
``Examining GAO's Findings on Efforts to Improve Oversight of Low-
Income and Minority Serving Institutions.''
As many of you know, I have fought vigorously to increase federal
resources to MSI's throughout my tenure in congress.
Historically Black Colleges and Universities (HBCUs), Hispanic-
Serving Institutions (HSIs), Tribal Colleges and Universities (TCUs),
Alaska Native-Serving Institutions or Native Hawaiian-Serving
Institutions, Predominantly Black institutions, Asian American and
Native American Pacific Islander-Serving Institutions and Native
American-Serving Nontribal Institutions are an invaluable segment of
our nation's higher education system.
Each year, they ensure access and affordability to millions of
minority and low-income students and workers.
Over the past fifteen years or so, we have made significant strides
in addressing the funding gap for these institutions. On March 30th,
President Obama signed the Health Care and Education Reconciliation Act
of 2010, providing $2.55 billion for Title III and Title V
institutions. This is the largest investment ever in HBCUs and MSIs.
At this time, I wish to acknowledge HBCUs for the tremendous job
they have done in educating a large proportion of our nation's African-
American students.
HBCUs prepare exceptional leaders in the fields of medicine, law,
science, technology, engineering, mathematics, teaching, and other
areas where minority students continue to be underrepresented.
According to ``The State of America's Black Colleges'' HBCUs
graduate 40 percent of all African-American students receiving a four-
year STEM degree and 50 percent of African-American teachers.
HBCUs play an extremely vital role in our nation's higher education
system and serve as role models for other institutions of higher
learning.
We have also made substantial progress in supporting and developing
the capacity of Hispanic-Serving Institutions (HSIs). According to
Excelencia in Education, a non-profit organization which promotes
success for Latinos in higher education, HSIs enroll approximately half
of all Latino undergraduates in the United States.
In 1995, HSIs received an appropriation of just $12 million; they
were one of a number of institutions receiving funding under Title III.
In 1998, we were successful in creating a separate title for HSIs to
underscore the importance of these institutions to our nation's growing
Latino community.
In FY 2010, the developing Hispanic-Serving Institutions program
received an appropriation of $117 million, and the promoting post-
baccalaureate opportunities, our newly created graduate program for
HSIs, received appropriations of $22 million.
I am very proud of what our committee has been able to accomplish
for all of our institutions. As we build on our successes and set goals
for the next decade, it is imperative that we have stronger mechanisms
to monitor these federal programs.
We must have increased accountability and work with the U.S.
Department of Education to improve annual monitoring and reporting
requirements. Our students deserve the very best, and our institutions
must provide exemplary leadership in managing these resources
effectively.
To achieve President Obama's goal of leading the world in college
graduates by 2020, we must ensure that MSIs are doing their part to
increase persistence, retention, and completion rates for all students.
Based on the findings of the GAO report, four institutions used
grant funds improperly and that is a serious concern for me.
The GAO report is a great starting point for today's hearing, and I
hope that we can have a robust discussion and learn more about these
issues from our distinguished witnesses.
Thank you, I now yield to Ranking Member Guthrie.
______
Mr. Guthrie. Thank you, Mr. Chairman. I appreciate you
holding this hearing.
And thank you, Mr. Scott and Secretary Shireman, for coming
today. We appreciate you being here.
This hearing is about the Government Accountability
Office's recent findings concerning the Department of
Education's oversight and monitoring of Federal funds intended
to support low-income and minority serving institutions.
Federal funds flow to these institutions primarily through
programs authorized under Title III and V of the Higher
Education Act. I look forward to hearing about GAO's
examination of the Department's efforts to ensure taxpayers'
funds are spent appropriately.
The diversity that currently exists within the American
higher education system is part of what makes our education
system the envy of the world. The institutions that receive
funds through these programs serve some of the most vulnerable
students and those students perhaps in the most need of a
postsecondary education. These students come from either low-
income, first-generation, or minority families that are often
underserved in the higher education system. As a result, it is
important to ensure the institutions being attended by these
students are using Federal taxpayer dollars wisely.
I am concerned by the GAO's findings that there still
exists a lack of proper oversight regarding how program dollars
are being spent. The institutions these programs are intended
to support are already underresourced and may need additional
assistance understanding all of the parameters that go with
receiving a Federal grant. To ensure the success of these
institutions, it is critically important every Federal dollar
is spent properly.
I recognize GAO did find the Department of Education has
made some improvements in response to previous reports of fraud
and its use of funds. However, I am concerned that as Congress
has increased taxpayer support of these institutions the
Department has not also increased its monitoring and oversight.
Through its investigations, GAO found misuse of Federal funds
at four of the seven institutions they visited, including one
institution recommended by the Department as a model grantee.
Our country is facing a difficult economic time, and just
this week the Federal debt passed an historic $13 trillion.
This year alone we are expected to run a Federal deficit of
$1.5 trillion.
For many Americans, including many low-income or minority
students, higher education is the way to a better life.
Congress recognized the public good advanced by providing
Federal assistance to institutions that serve underprivileged
students and spelled out how support was to be allocated to
ensure students benefit from a quality education and taxpayers
have confidence limited Federal resources are spent wisely.
It is important that the Department of Education do its
part to ensure these institutions are acting in accordance with
the letter and spirit of the law. I look forward to hearing
what steps the Department has done since the release of this
report and why.
And, with that, I thank the chairman for holding this
hearing; and I yield back.
[The statement of Mr. Guthrie follows:]
Prepared Statement of Hon. Brett Guthrie, Senior Republican Member,
Subcommittee on Higher Education, Lifelong Learning, and
Competitiveness
Thank you Mr. Chairman.
This hearing is about the Government Accountability Office's recent
findings concerning the Department of Education's oversight and
monitoring of federal funds intended to support low-income and
minority-serving institutions. Federal funds flow to these institutions
primarily through programs authorized under Title III and Title V of
the Higher Education Act. I look forward to hearing about GAO's
examination of the Department's efforts to ensure taxpayer funds are
spent appropriately.
The diversity that currently exists within the American higher
education system is part of what makes our education system the envy of
the world. The institutions that receive funds through these programs
serve some of the most vulnerable students and those students perhaps
in most need of a postsecondary education. These students come from
either low-income, first-generation or minority families and are often
underserved in the higher education system.
As a result, it is important to ensure the institutions being
attended by these students are using federal taxpayer dollars wisely. I
am concerned by the GAO's findings that there still exists a lack of
proper oversight regarding how program dollars are being spent. The
institutions these programs are intended to support are already under-
resourced and may need additional assistance understanding all the
parameters that go with receiving a federal grant. To ensure the
success of these institutions, it is critically important every federal
dollar is spent properly.
I recognize GAO did find the Department of Education has made some
improvements in response to previous reports of fraud and misuse of
funds. However, I am concerned that as Congress has increased taxpayer
support for these institutions, the Department has not also increased
its monitoring and oversight. Through its investigations, GAO found
misuse of federal funds at four of the seven institutions they visited,
including one institution recommended by the Department as a ``model
grantee.''
Our country is facing a difficult economic time and just this week
the federal debt passed an historic $13 trillion. This year alone, we
are expected to run a federal deficit of $1.5 trillion. For many
Americans, including many low-income or minority students, higher
education is the way to a better life. Congress recognized the public
good advanced by providing federal assistance to institutions that
serve under-privileged students and spelled out how support was to be
allocated to ensure students benefit from a quality education and
taxpayers have confidence limited federal resources are spent wisely.
It is important the Department of Education do its part to ensure these
institutions are acting in accordance with the letter and spirit of the
law.
I look forward to hearing what steps the Department has done since
the release of this report and with that, I thank the Chairman for
holding this hearing and I yield back.
______
Chairman Hinojosa. Before I introduce the panelists, I want
to read into the record that all members will have 14 days to
submit additional materials or questions for the hearing
record.
This subcommittee hearing on May 27, 2010, will hear from
two witnesses. The first one I wish to introduce is Mr. George
Scott, who is the Director, Education, Workforce, and Income
Security issues for the United States Government Accountability
Office. He is a frequent witness before our committee. He
oversees the high-quality work that GAO provides for our
committee in various areas of our jurisdiction.
He is a graduate of North Carolina at Chapel Hill and has
received several GAO management awards. George has been
recognized for exemplary achievement in public administration.
Once again, we are anxious to hear from you, sir, and we
welcome you.
Also, we will hear from Mr. Robert Shireman, who is the
Deputy Under Secretary in the Department of Education. He is a
leading expert on college access and financial aid. Prior to
his appointment, he served on the Federal and Advisory
Committee on Student Financial Assistance. Robert has served as
staff for Senator Simon, and during the Clinton administration
he served on the National Economic Council.
He holds a bachelor's degree in economics from the
University of California at Berkeley. He earned a masters
degree from Harvard in education and the University of San
Francisco in public policy.
Thank you for being with us today.
For those of you who have not testified before this
subcommittee, let me explain our lighting system and the 5-
minute rule. Everyone, including members, is limited to 5
minutes of presentation or questioning. The green light is
illuminated when you begin to speak, and when you see the
yellow light it means you have 1 minute remaining. When you see
the red light, it means your time has expired and you need to
conclude your testimony. Please be certain as you testify to
turn on and speak into the microphones in front of you.
With that, we will now hear from our first witness, Mr.
Scott.
STATEMENT OF GEORGE SCOTT, DIRECTOR, EDUCATION, WORKFORCE AND
INCOME SECURITY ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Scott. Mr. Chairman, Ranking Member Guthrie, and
members of the subcommittee, I am pleased to be here today to
discuss the Department of Education's oversight of grants to
low-income and minority serving institutions.
As you know, Title III and Title V of the Higher Education
Act provide grants to strengthen and support these
institutions. Given the challenges that many of these schools
face, grants for these programs will continue to play an
important role in helping them. Funding for these programs has
increased significantly over the past 10 years, almost tripling
from $230 million in 1999 to $681 million in 2009. Last year,
we again reported on our long-standing concerns with
Education's oversight of these grants. Today, I will discuss
the Department's progress in addressing those concerns.
In summary, Education has made some progress in
implementing a systematic approach to grant monitoring and
technical assistance, but much work remains to be done.
GAO and Education's Inspector General have recommended
multiple times that Education implement such an approach to
better evaluate the performance of grantees. For example, in
2004, we recommended that Education complete its electronic
monitoring system and training programs to ensure its
monitoring plans target at-risk grantees. In our recent report,
however, we found that, while Education has taken some steps to
better target monitoring, many of its initiatives have yet to
be fully realized. Currently, Education is still in the
processes of modifying its monitoring approach.
To its credit, we found that Education has made progress in
automating its monitoring tools and developing risk-based
criteria. The redesigned system brings together information
about a school's performance in managing all of its higher
Education grants, increasing education's ability to assess the
risk of grantee noncompliance.
Another feature of the system is a monitoring index that
identifies institutions that need heightened monitoring or
assistance.
Education has also taken steps to improve the technical
assistance it provides to grantees and develop mechanisms to
routinely collect and use grantee feedback.
Despite progress in these areas, we found that Education
still lacked a coordinated approach to guide its monitoring
efforts. The Department recently developed a draft monitoring
plan for Title III and Title V programs, but it has not
consistently developed realistic and measurable targets for
each of the activities in the plan. For example, Education
commits to offering physical monitoring training, but it has
not established measurable targets for how many staff will
receive the training or how it will determine the effectiveness
of the training. Without a comprehensive approach to
monitoring, Education lacks assurance that grantees
appropriately manage Federal funds, increasing the potential
for fraud, waste, or abuse.
We identified over $140,000 in questionable expenditures at
four of the seven institutions where we conducted financial
site visits. For example, at one institution, we identified
significant internal control weaknesses and over $105,000 in
questionable expenditures. These expenditures included almost
$80,000 for student field trips to locations such as amusement
parks. Grant funds were also used to purchase an airplane
global positioning system, even though the school did not own
an airplane.
Education had recommended that we visit this school as an
example of a model grantee. We referred the problems we found
at this school to Education's Inspector General for further
investigation. In response to our recommendation, the
Department is following up on each of the questionable
expenditures we identified during our visits.
In conclusion, Education has taken steps to respond to our
recent recommendations to improve grant oversight, but it is
too early to tell if the Department has fully embraced a
comprehensive risk-based approach to monitoring. The
questionable expenditures we identified at some schools
demonstrate the importance of Education having an effective
monitoring and technical assistance program in place. Targeting
oversight and assistance to grantees with the greatest risk is
critical to ensuring that grant funds are used to improve
institutional capacity and student outcomes. To do this
effectively will require Education's sustained attention and a
long-term commitment. We will continue to track the
Department's progress in fully implementing our
recommendations.
Mr. Chairman, this concludes my prepared remarks. I would
be happy to answer any questions that you or other members of
the subcommittee may have. Thank you.
[The statement of Mr. Scott follows:]
Prepared Statement of George A. Scott, Director, Education, Workforce,
and Income Security, U.S. Government Accountability Office
Mr. Chairman and Members of the Subcommittee: I am pleased to be
here today to discuss the Department of Education's (Education)
oversight of grant assistance to schools that provide low-income and
minority students with access to higher education. While higher
education has become more accessible than ever before, students from
some demographic groups still face challenges in attending college. In
2007, for example, an estimated 58 percent of low-income students
enrolled in college soon after completing high school, compared to 78
percent of students from high-income families. Similarly, African
American and Hispanic high school graduates enrolled at lower rates
than white students. To help improve access to higher education for
minority and low-income students, Titles III and V of the Higher
Education Act, as amended, provide grants to strengthen and support
institutions that enroll large proportions of these students.\1\
---------------------------------------------------------------------------
\1\ Title III and V programs include three Title III, Part A
programs: Strengthening Institutions, American Indian Tribally
Controlled Colleges and Universities, and Alaska Native and Native
Hawaiian Serving Institutions. They also include Title III, Part B
Strengthening Historically Black Colleges and Universities, and Title
V, Part A Developing Hispanic Serving Institutions. Throughout this
testimony when we refer to Title III and Title V programs or grants, we
are referring to these specific programs. Our review did not include
Title III, Part A Predominantly Black Institutions, Title III, Part A
Native American-serving, Nontribal Institutions, Title III, Part A
Asian American and Native American Pacific Islander-serving
Institutions, Title III, Part B Historically Black Professional or
Graduate Institutions; Part D Historically Black Colleges and
Universities Capital Financing; or Part E Minority Science and
Engineering Improvement Program.
---------------------------------------------------------------------------
Today I will discuss progress Education has made in monitoring the
financial and programmatic performance of Title III and V grantees. In
August 2009, we issued a report that discussed long-standing concerns
regarding Education's oversight of these programs that limit its
ability to ensure grant funds are used appropriately.\2\ This testimony
is based on that report and updated information provided by Education.
In developing that report, we analyzed data from grantees' annual
performance reports detailing expenditures of fiscal year 2006 grant
funds and conducted site visits at seven grantee institutions. We also
interviewed officials at Education and reviewed grant program
requirements and monitoring plans. We conducted the work for our August
2009 report from September 2007 to June 2009 in accordance with
generally accepted government auditing standards and updated this
information from April to May 2010. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
---------------------------------------------------------------------------
\2\ GAO, Low-Income and Minority Serving Institutions: Management
Attention to Long-standing Concerns Needed to Improve Education's
Oversight of Grant Programs, GAO-09-309 (Washington, D.C.: Aug. 17,
2009).
---------------------------------------------------------------------------
Background
Postsecondary institutions that serve large proportions of low-
income and minority students are eligible to receive grants from
Education through programs authorized under Title III and Title V of
the Higher Education Act, as amended.\3\ Institutions eligible to
receive these grants include historically black colleges and
universities, Hispanic-serving institutions, tribally controlled
colleges and universities, Alaska Native-serving institutions and
Native Hawaiian-serving institutions, and other undergraduate
postsecondary institutions that serve large numbers of low-income
students. In 2007, Congress authorized new programs for other
categories of minority serving institutions, including predominantly
black institutions, Native American-serving nontribal institutions, and
Asian American and Native American Pacific Islander-serving
institutions.\4\
---------------------------------------------------------------------------
\3\ 20 U.S.C. Sec. 1051 et seq. and 20 U.S.C. Sec. 1101 et seq.
\4\ These programs were first authorized in the College Cost
Reduction and Access Act (Pub. L. No. 110-84) and reauthorized in the
Higher Education Opportunity Act (Pub. L. No. 110-315). They received
initial funding in fiscal year 2008 and were therefore not included in
our review.
---------------------------------------------------------------------------
Funding for Title III and V programs included in our review has
increased significantly over the past 10 years. In fact, funding almost
tripled from fiscal year 1999 to fiscal year 2009, increasing from $230
million to $681 million (see table 1). In addition, fiscal year 2009
funding for the three new Title III programs created in 2007 was $30
million.
TABLE 1.--TITLE III AND V FUNDING: FISCAL YEARS 1999 AND 2009
[Dollars in millions]
------------------------------------------------------------------------
Funding program 1999 2009
------------------------------------------------------------------------
Title III, Part A, Strengthening Institutions..... $60 $80
Title III, Part A, Tribal Colleges and 3 53
Universities.....................................
Title III, Part A, Alaska Native and Native 3 32
Hawaiian Institutions............................
Title III, Part B, Historically Black Colleges and 136 323
Universities.....................................
Title V, Part A, Hispanic-Serving Institutions.... 28 193
---------------------
Total....................................... $230 $681
------------------------------------------------------------------------
Source: Appendix, Budget of the United States Government for Fiscal Year
2001, ``Department of Education,'' (Feb. 7, 2000), at 362; Appendix,
Fiscal Year 2011, (Feb. 1, 2010), at 376.
While the institutions included in these programs differ in terms
of the racial and ethnic makeup of their students, they serve a
disproportionate number of financially needy students and have limited
financial resources, such as endowment funds, with which to serve them.
The Higher Education Act outlines broad goals for these grants, but
provides flexibility to institutions in deciding what approaches will
best meet their needs. An institution can use the grants to focus on
one or more activities to address challenges articulated in its
comprehensive development plan, which is required as part of the grant
application and must include the institution's strategy for achieving
growth and self-sufficiency. Under Education's program guidance,
institutions are allowed to address challenges in four broad focus
areas: academic quality, student support services, institutional
management, and fiscal stability. For example, funds can be used to
support faculty development; purchase library books, periodicals, and
other educational materials; hire tutors or counselors for students;
improve educational facilities; or build endowments.
Long-Standing Deficiencies in Grant Monitoring and Technical Assistance
Limit Education's Ability to Ensure That Funds Are Used
Properly and Grantees Are Supported
education has made limited progress toward implementing a systematic
approach to monitoring and technical assistance
GAO and Education's Inspector General have recommended multiple
times that Education implement a systematic monitoring approach to
better assess the fiscal and programmatic performance of Title III and
V grantees. Such an approach would include implementing formal
monitoring and technical assistance plans based on risk models and
developing written procedures for providing technical assistance. In
2004, for example, we recommended that Education complete its
electronic monitoring system and training programs to ensure its
monitoring plans are carried out and target at-risk grantees.\5\ In our
2009 report, however, we found that while Education had taken some
steps to better target its monitoring in response to our previous
recommendation, many of its initiatives had yet to be fully realized.
Accordingly, we recommended that the Secretary of Education develop a
comprehensive, risk-based approach to target grant monitoring and
technical assistance based on the needs of grantees. Education
officials agreed with this recommendation and told us that they were
working to implement it. At this time, however, Education is still in
the process of modifying its monitoring approach and it is too early to
determine the effectiveness of its efforts. Table 2 summarizes the
status of Education's key monitoring initiatives, followed by a more
detailed discussion of each initiative.
---------------------------------------------------------------------------
\5\ GAO, Low-Income and Minority Serving Institutions: Department
of Education Could Improve Its Monitoring and Assistance, GAO-04-961
(Washington, D.C.: Sept. 21, 2004).
TABLE 2.--A COMPARISON OF THE STATUS OF EDUCATION'S MONITORING
INITIATIVES IN 2004 AND 2010
------------------------------------------------------------------------
Monitoring
initiative 2004 status 2010 status
------------------------------------------------------------------------
Implement Education Redesigned in fiscal year 2007
electronic implemented because the original system did not
monitoring electronic achieve its intended goal of
system monitoring of presenting a comprehensive view of
Title III and V risk based on an institution's
grantees at the portfolio of higher education
end of 2004. grants from Education. The new
system is now fully operational and
allows for electronic storage of
all grant file records.
------------------------------------------------------------------------
Establish The program office The program office for Title III and
risk-based for Title III and V grants established preliminary
criteria V grants developed risk-based criteria for all its
risk-based grant programs in fiscal year 2008.
criteria in fiscal Criteria were used to create a
year 2003, but monitoring index to identify
used these schools for additional monitoring,
criteria but only a small portion of these
inconsistently criteria were being utilized to set
within the program priorities at the time of our 2009
office. report. While Education officials
recently told us that they plan to
use the monitoring index to select
half of the schools selected for
site visits, they have not done so
for visits conducted so far in
fiscal year 2010.
------------------------------------------------------------------------
Develop Following a fiscal Once Education rescinded the
monitoring year 2002 effort requirement to submit annual
plans to place greater monitoring plans in 2006, the
emphasis on program office ceased to develop
performance monitoring plans. In response to a
monitoring for all new agency-wide requirement, the
grantees, annual program office has recently
monitoring plans developed a new monitoring plan for
were developed to fiscal year 2010 to help facilitate
guide monitoring a more coordinated and risk-based
and technical approach to monitoring and intends
assistance. to develop a monitoring plan
annually; however, some of the
monitoring activities lack
realistic and measurable
performance goals.
------------------------------------------------------------------------
Design While program staff The requirement for program officers
comprehensiv were required to to complete a minimum number of
e approach complete at least site visits was eliminated and few
to site two site visits site visits have been completed
visits annually, the since 2004. Most completed visits
majority of staff did not include financial
did not fulfill monitoring to determine whether
the requirement. program funds were properly used.
Site visits that Since our report, site visits in
were conducted 2009 and 2010 have remained
lacked a standard limited.
approach and
varied in quality.
------------------------------------------------------------------------
Develop Education developed Education has developed courses to
training for a corrective enhance its monitoring training,
enhanced action plan to but as of our 2009 report, most
monitoring provide additional staff had not completed coursework
courses over a 3- and one key course had yet to be
year period to offered. Education officials
address training recently told us that they have
needs of its developed two new training courses
staff. to address skill deficits
identified by GAO; however, only
about half of program staff have so
far attended the two courses on
programmatic and fiscal monitoring
during site visits.
------------------------------------------------------------------------
Source: GAO analysis.
electronic monitoring system and risk-based criteria
In 2009, we found that Education had made progress in automating
its monitoring tools and developing risk-based criteria. Specifically,
Education redesigned its electronic monitoring system in 2007 to add
several key enhancements which, if fully integrated into the oversight
activities of program staff, have the potential to improve the quality
and consistency of monitoring. The redesigned system brings together
information about an institution's performance in managing its entire
portfolio of higher education grants, increasing Education's ability to
assess the risk of grantee noncompliance with program rules. Program
officers can also enter into the system updates about a grantee's
performance, based on routine interactions with the grantee. Because
the system integrates financial and programmatic data, such as
institutional drawdown of grant funds and annual performance reports,
staff have ready access to information needed to monitor grantees.
However, it will be important for Education to ensure that staff use
the system to appropriately monitor grantee performance. For example,
our 2009 report found that program staff did not consistently review
the annual performance reports grantees are required to submit--reports
that provide key information to determine whether grantees have
demonstrated adequate progress to justify continued funding. Education
officials reported that they have established new processes and a new
form to ensure that staff review these reports as part of their regular
monitoring activities.
Another feature of the system is a monitoring index, implemented in
2008, that identifies institutions that need heightened monitoring or
technical assistance based on criteria designed to assess risk related
to an institution's ability to manage its grants. For example, at the
time of our 2009 report, an institution that had lost accreditation or
had grants totaling more than $30 million was automatically prioritized
for heightened monitoring, which could involve site visits or other
contacts with the school. Since our 2009 report, Education has twice
updated the index. For fiscal year 2010, Education officials told us
they reduced the number of criteria to focus on those that it has found
more accurately identify high-risk schools that are likely to be
experiencing financial or management problems. The fiscal year 2010
index has identified 64 institutions across all higher education grant
programs for heightened monitoring, half of which participate in Title
III or V programs.
annual monitoring plans
Our 2009 report found that Education still lacked a coordinated
approach to guide its monitoring efforts. In 2002, Education directed
each program within the agency to develop a monitoring plan to place
greater emphasis on performance monitoring for all grantees and to
consider what assistance Education could provide to help grantees
accomplish program objectives. However, Education rescinded the
requirement in 2006 because the practice did not achieve the intended
purpose of better targeting its monitoring resources, and Education
officials told us the program office for Title III and V grants
discontinued the development of annual monitoring and technical
assistance plans.
Since our report was published, Education required all major
program offices to develop a monitoring plan for fiscal year 2010.
Officials from the office responsible for administering Title III and V
programs said they submitted a monitoring plan for review in February
2010, and have been using the plan in draft form while waiting for it
to be approved. The plan for Title III and V programs outlines
Education's monitoring approach and describes various monitoring tools
and activities--such as the monitoring index and site visits; how they
are to be used to target limited monitoring resources to grantees that
need it most; and an increased focus on staff training. The monitoring
plan also includes a section on next steps and performance measures,
but Education has not consistently developed realistic, attainable, and
measurable targets for each of the monitoring tools and activities
outlined in the plan. For example, Education developed specific goals
for the number of site visits and technical assistance workshops it
would conduct, but it will consider these goals attained if it
completes at least 75 percent of them. Additionally, under staff
training, Education commits to offering fiscal monitoring training
sessions, but it has not established measurable targets for how many
staff will receive the training or how it will determine the
effectiveness of the training in meeting staff needs.
site visits
With the implementation of an electronic monitoring system and
risk-based monitoring index, Education now has tools to enhance its
ability to select grantees for site visits, a critical component of an
effective grants management program. Targeting grantees that need
assistance or are at high risk of misusing grant funds is critical,
given Education's limited oversight resources and the expansion of its
grant oversight responsibilities with the addition of new Title III
programs created in 2007. In our 2009 report, however, we found that
overall site visits to Title III and V grantees had declined
substantially in recent years (see table 3), and Education was not
making full use of its risk-based criteria to select grantees for
visits. Since our 2009 report, site visits to Title III and V grantees
have remained limited, with six visits conducted in fiscal year 2009
and five visits completed more than half-way through fiscal year 2010.
TABLE 3.--SITE VISITS TO TITLE III AND V GRANTEES, FISCAL YEARS 2003 THROUGH 2010
----------------------------------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 2008 2009 2010 \a\
----------------------------------------------------------------------------------------------------------------
Number of site visits................................ 26 18 6 10 1 5 6 5
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of Department of Education data.
\a\ Completed as of May 2010. Education conducted an additional site visit in 2010 to an institution that
participated in one of the grant programs not included in our review. Education officials told us that they
plan to conduct eight additional site visits in fiscal year 2010.
One former senior Education official told us that site visits had
declined because the program office had limited staff and few had the
requisite skills to conduct financial site visits. To obtain the
experience and skills needed to conduct comprehensive site visits,
Education leveraged staff from another office to conduct site visits
for Title III and V programs in 2008, but Education officials recently
told us that staff from that office have been dispersed and are no
longer available to conduct site visits. They also told us they
anticipate hiring four new program officers during the summer of 2010,
but it is unclear what effect such hiring will have on Education's
ability to conduct site visits.
Our 2009 report also found that the program office for Title III
and V grants was not fully using its monitoring index to select high
risk schools for site visits. Aside from referrals from the Inspector
General, Education officials told us they selected schools for fiscal
year 2008 and 2009 site visits based on the total amount of higher
education grants awarded (i.e. grantees receiving $30 million or more),
which represented only 5 percent of the monitoring index criteria in
these years. In response to our 2009 report, Education officials said
that they would use the revised monitoring index to select half of the
schools chosen for site visits. However, none of the five site visits
completed so far in fiscal year 2010 was selected based on the
monitoring index. Education officials told us that they have used the
index to select five of the eight remaining site visits planned for
2010, but these have not been scheduled yet. Using its monitoring index
to select fewer than half of its site visits does not seem to be a
fully risk-based approach, leaving open the possibility that Education
will not target its limited resources to those grantees most likely to
experience problems.
staff training
In our 2009 study, we reported that Education had made progress in
developing grant monitoring courses to enhance the skills of Title III
and V program staff, but skill gaps remained that limited their ability
to fully carry out their monitoring and technical assistance
responsibilities. For example, Education had developed courses on
internal control and grants monitoring, but these courses were attended
by less than half of the program staff. Senior Education officials also
identified critical areas where additional training is needed.
Specifically, one official told us that the ability of program staff to
conduct comprehensive reviews of grantees had been hindered because
they had not had training on how to review the financial practices of
grantees. As a result, our 2009 report recommended that Education
provide program staff with the training necessary to fully carry out
their monitoring and technical assistance responsibilities. Education
agreed with the recommendation and has developed additional training in
key areas. Specifically, Education developed two courses on how to
conduct programmatic and fiscal monitoring during a site visit, but
only about half of the program officers have attended both courses so
far. Education has also established a mentoring program that pairs new
program officers with experienced staff. While Education is taking
steps to develop training in needed skill areas, implementing an
effective monitoring system will require sustained attention to
training to ensure that all staff can perform the full range of
monitoring responsibilities.
technical assistance
While Education provides technical assistance for prospective and
current Title III and V grantees through preapplication workshops and
routine interaction between program officers and grant administrators
at the institutions, our 2009 report found that it had not made
progress in developing a systemic approach that targeted the needs of
grantees. According to one senior Education official, technical
assistance is generally provided to grantees on a case-by-case basis at
the discretion of program officers. Grantees we interviewed told us
that Education does not provide technical assistance that is consistent
throughout the grant cycle. Several officials complimented the
technical assistance Education provided when they applied for grants,
but some of those officials noted a precipitous drop in assistance
during the first year after grants were awarded. During the initial
year, grantees often need help with implementation challenges, such as
recruiting highly qualified staff, securing matching funds for
endowments, and overcoming construction delays. In the past, grantees
had an opportunity to discuss such challenges at annual conferences
sponsored by Education, but Education did not hold conferences for 3
years from 2007 to 2009, despite strong grantee interest in resuming
them. According to Education officials, resource constraints prevented
them from holding the conferences in those years.
To improve the provision of technical assistance, our 2009 report
recommended that Education disseminate information to grantees about
common implementation challenges and successful projects and develop
appropriate mechanisms to collect and use grantee feedback. In
response, Education held a conference for all Title III and V grantees
in March 2010, with sessions focused specifically on best practices.
Education officials told us that they plan to organize another
conference in 2011 and said they will explore the use of webinars to
share information with grantees that may be unable to attend. Education
has also created an e-mail address for grantees to express concerns,
ask questions, or make suggestions about the programs. The address is
displayed on every program Web page and is monitored by an Education
official not associated with the program office to allow grantees to
provide anonymous feedback. In addition, Education officials reported
that they have developed a customer satisfaction survey that the Office
of Management and Budget has approved for distribution. The survey will
be sent to new grantees and grantees that are near the end of their
grant period and will obtain feedback on the quality of information
provided before a grant is approved, the quality of technical
assistance provided, and satisfaction with communications with the
program office.
Education Lacks Assurance That Grant Funds Are Used Appropriately
Without a comprehensive approach to target its monitoring,
Education lacks assurance that grantees appropriately manage federal
funds, increasing the potential for fraud, waste, or abuse. In our 2009
report, we reviewed financial and grant project records at seven
institutions participating in Title III and V programs in fiscal year
2006 and identified $142,943 in questionable expenses at 4 of the 7
institutions we visited (see table 4).\6\
---------------------------------------------------------------------------
\6\ Questionable expenses are expenditures that appear to have been
made for incorrect amounts, for unauthorized purposes, or for personal
use. They can be inadvertent errors, such as duplicate payments and
calculation errors, or violations of grant agreement terms, such as
payments for unsupported or inadequately supported claims or payments
resulting from fraud and abuse.
TABLE 4.--SUMMARY OF FINDINGS FROM FINANCIAL SITE VISITS
----------------------------------------------------------------------------------------------------------------
Total dollars Questionable grant
Grantee\a\ State reviewed expenses
----------------------------------------------------------------------------------------------------------------
A........................... Texas............................ $300,438 $2,127
B........................... Puerto Rico...................... 353,963 29,258
C........................... Illinois......................... 226,670 .........................
D........................... Maryland......................... 427,180 105,117
E........................... Tennessee........................ 175,388 .........................
F........................... California....................... 108,977 6,441
G........................... North Dakota..................... 299,846 .........................
------------------------------------------------
Total................. ................................. $1,892,462 $142,943
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of grantee disbursement records conducted during site visits.
\a\ The seven institutions were selected using a nonprobability sample based on factors such as program
participation, grant size, and geographic location.
At one institution--Grantee D--we identified significant internal
control weaknesses and $105,117 in questionable expenditures. A review
of grant disbursement records revealed spending with no clear link to
the grant and instances in which accounting procedures were bypassed by
the school's grant staff. Of the questionable expenditures we
identified, $88,195 was attributed to an activity designed to promote
character and leadership development, of which more than $79,975 was
used for student trips to locations such as resorts and amusement
parks. According to the grant agreement, the funds were to be used for
student service learning projects; instead, more than $6,000 of grant
funds was used to purchase a desk and chair and another $4,578 was used
to purchase an airplane global positioning system even though the
school did not own an airplane. In purchasing the global positioning
system and office furniture, a school official split the payments on an
institutionally-issued purchase card to circumvent limits established
by the institution. Officials at the institution ignored multiple
warnings about mismanagement of this activity from external evaluators
hired to review the grant. Education visited the school in 2006 but
found no problems, and recommended we visit the institution as an
example of a model grantee. We referred the problems we noted at this
institution to Education's Inspector General for further investigation.
Examples of the questionable expenditures we identified at three
other institutions we visited included:
At Grantee A, we were unable to complete testing for about
$147,000 of grant fund transactions due to a lack of readily available
supporting documentation. For one transaction that was fully
documented, the grantee improperly used $2,127 in grant funds to pay
late fees assessed to the college. Once we pointed out that grant funds
cannot be used for this purpose, the college wrote a check to reimburse
the grant.
Grantee B used $27,530 to prepay subscription and contract
services that would be delivered after the grant expired.
Grantee F used more than $1,500 in grant funds to purchase
fast food and more than $4,800 to purchase t-shirts for students.
Our 2009 report recommended that Education follow up on each of the
improper uses of grant funds identified.\7\ In response, Education
conducted a site visit to one institution in November 2009 and approved
its corrective action plans. Education officials also reported that
they visited two other institutions in April 2010 and plan to visit the
fourth institution before November 2010.
---------------------------------------------------------------------------
\7\ We presented Education with the results of our analysis
supporting each of our findings related to our grantee visits.
---------------------------------------------------------------------------
Concluding Observations
We have recommended multiple times that Education implement a
systemic approach to monitoring postsecondary institutions receiving
Title III and V grants. As we reported in 2009, Education has made
progress in developing tools--such as an electronic monitoring system
and risk-based criteria--to assess potential risks, but it lacks a
comprehensive risk-based monitoring and technical assistance approach
to target its efforts. In the 9 months since our report was issued,
Education taken some steps to respond to our most recent
recommendations, but it is too early to tell if it has fully embraced a
risk-based monitoring approach. For example, Education is still not
relying on its risk-based monitoring index to target site visits to
schools at highest risk. Until Education is fully committed to such an
approach, Title III and V funds will continue to be at risk for fraud,
waste, or abuse. The internal control weaknesses and questionable
expenditures we identified at some grantees we reviewed demonstrate the
importance of having a strong and coordinated monitoring and assistance
program in place, especially as Education is called on to administer
additional programs and funding. Targeting monitoring and assistance to
grantees with the greatest risk and needs is critical to ensuring that
grant funds are appropriately spent and are used to improve
institutional capacity and student outcomes. To do this effectively
will require Education's sustained attention and commitment. We will
continue to track Education's progress in fully implementing our
recommendations.
Mr. Chairman, this concludes my prepared remarks. I would be happy
to answer any questions that you or other members of the subcommittee
may have.
______
Chairman Hinojosa. At this time, we will hear from Deputy
Under Secretary Shireman.
STATEMENT OF ROBERT SHIREMAN, DEPUTY UNDERSECRETARY, U.S.
DEPARTMENT OF EDUCATION
Mr. Shireman. Thank you, Chairman Hinojosa, Ranking Member
Guthrie, and members of the subcommittee, for the opportunity
to testify about our efforts to strengthen minority serving
institutions.
We very much appreciate GAO's continuing review of our
oversight of the Title III and V programs. The effectiveness of
these institutions is critical to meeting the President's 2020
goal for college completion. We know that we will not meet that
goal if we continue business as usual, if institutions don't
improve retention rates, graduation rates in their efforts to
improve institutions; and that is the purpose of these funds
for minority serving institutions, to improve academic quality,
to improve institutional management, to improve the fiscal
stability of the institutions so that they can best serve
students.
We have to manage this program well, also, as we encourage
institutions to do the best job possible to manage their
programs for students. That means providing targeted support
and assistance to institutions where there is an indication
that they need that kind of help. It means being responsive
when we become aware of issues at institutions. And it means
that we need to be aware of the same kind of learning
organization that we want colleges to be, getting better and
better at the work that we do with those institutions.
On the particular issues that GAO raised in its report, we
are pleased to say that we are now doing a better job of using
data to target our grant monitoring. We now have a monitoring
index for identifying institutions for possible review that
looks at audit findings, accreditation findings, commercial
credit scores, and other measures that goes into the index to
help identify institutions for us to review.
We also review annual performance reports from institutions
that tell us how are they doing on the goals that they set out
when they first received the grant so that we can respond when
goals are not being achieved, benchmarks aren't being reached,
or if money is being spent in ways that was not a part of the
plan.
We have increased our site visits. We expect 14 site visits
of Title III and V institutions in this fiscal year, which
compares to six that were done last year.
We are following up on the improper use of funds that were
identified in the GAO report. Three of four planned site visits
have been done, and one more is planned.
Training of our staff for monitoring and technical
assistance has increased with a new orientation process, a
mentoring process where we pair experienced staff with newer
staff for site visits so that they can learn from those who are
experienced. Mandatory internal controls training to all of
these as part of the effort to make sure that our staff are
well qualified to do the oversight and site visits at
institutions that have been identified.
And on the other two recommendations the GAO has made,
disseminating lessons learned and getting feedback from
institutions, we held in March, for the first time in 10 years,
a project director's conference here in Washington with 1,000
plus project directors from MSIs around the country to provide
the kind of sharing of best practices across institutions and
for us to be able to hear concerns and questions in an area
that we can be more helpful on.
We are enhancing our staffing and leadership in the office
and even provided a way for institutions to provide us with
anonymous feedback that we can then follow up on if they feel
uncomfortable raising an issue directly with their program
officer.
All of this is part of an effort for us to be a stronger
learning organization so that we can get better and better at
what we do and figure out how we can help institutions to grow,
improve, and graduate more students toward the President's 2020
goal. Our goal here is not only to make sure that the funds are
used appropriately but also to do all we can to make sure that
they are used as effectively as it is possible.
Thank you so much for the opportunity to testify, and I
would be happy to take questions.
[The statement of Mr. Shireman follows:]
Prepared Statement of Robert M. Shireman, Deputy Undersecretary,
U.S. Department of Education
Chairman Hinojosa, Ranking Member Guthrie and Members of the
Committee: Thank you for the opportunity to testify about the findings
of the Government Accountability Office (GAO) report ``Low-Income and
Minority Serving Institutions: Management Attention to Long-standing
Concerns Needed to Improve Education's Oversight of Grant Programs''
(GAO-09-309), as well as the opportunity to update you on the status of
the transition to the William D. Ford Federal Direct Loan (Direct Loan)
Program at minority-serving institutions (MSIs). The GAO report focused
on the federal oversight of institutions of higher education that
receive federal funds under certain programs authorized by Titles III
and V of the Higher Education Act of 1965 (HEA).
The GAO examined three programs under Title III, Part A of the HEA:
the Strengthening Institutions program (SIP), the American Indian
Tribally Controlled Colleges and Universities program (TCCU), and the
Alaska Native and Native Hawaiian Serving Institutions program (ANNH).
The Strengthening Historically Black Colleges and Universities program
(HBCUs), under Title III, Part B of the HEA and the Developing Hispanic
Serving Institutions program (HSIs) under Title V of the HEA were also
reviewed by GAO.
To be eligible for the Title III, Part A programs and the HSI
program, an institution must have at least 50 percent of its degree
students receiving need-based assistance under Title IV of the HEA, or
have a substantial number of enrolled students receiving Pell Grants,
and have low educational and general expenditures. The Secretary may
waive these eligibility requirements under certain conditions. There
are additional institutional eligibility requirements for the TCCU,
ANNH, and HSI programs. TCCU applicants are limited to tribal colleges
and universities, including institutions that qualify for funds under
the Tribally Controlled College or University Assistance Act of 1978 or
the Navajo Community College Assistance Act of 1978, or listed in
section 532 of the Equity in Educational Land Grant Status Act of 1994.
Under the ANNH program, an Alaska Native-serving institution must, at
the time of application, have an enrollment of undergraduate students
that is at least 20 percent Alaska Native students and a Native
Hawaiian-serving institution must have an enrollment of undergraduate
students that is at least 10 percent Native Hawaiian students. To be
eligible to receive a grant under the HBCU program, an institution must
have been established prior to 1964 and its principal mission must have
been, and must still be, the education of Black Americans. To be
eligible to receive funding under the HSI program, an institution must
have an enrollment of undergraduate full-time equivalent students that
is at least 25 percent Hispanic students at the end of the award year
immediately preceding the date of application.
The Title III and Title V programs are administered in the
Institutional Development and Undergraduate Education Service (IDUES)
division of the Department's Office of Postsecondary Education (OPE).
GAO was asked to determine: (1) the characteristics of institutions
eligible to receive grants under Titles III and V, including the
characteristics of students served by these institutions; (2) any
challenges that grantees face and how they spent Title III and Title V
funds to address these challenges; and (3) to what extent the
Department of Education monitors the financial and programmatic
performance of Title III and Title V grantees and uses this information
to target technical assistance.
The Title III and Title V programs are intended to strengthen and
support developing postsecondary institutions that enroll large
proportions of low-income and minority student populations. The
programs provide grants to help institutions improve their academic
quality, institutional management, and fiscal stability. Demographic
projections suggest that the minority student population will continue
to increase. Thus, the federal government maintains a continuing
interest in assisting Title III and Title V institutions meet these
students' needs.
The GAO study found that Title III and Title V eligible
institutions enrolled a greater percentage of minority students than
other institutions. Eligible institutions were also found to serve more
low-income students than ineligible institutions. The report says,
``Specifically, 44 percent of students enrolled in eligible
institutions received Pell grants compared to 26 percent at ineligible
institutions.'' Larger proportions of students at eligible institutions
were found to attend part-time, and with the exception of students
enrolling at HBCUs, to delay college enrollment. Eligible institutions
also had lower retention and graduation rates than other institutions.
Although grantees reported challenges in academic quality, student
support, institutional management, and fiscal stability, GAO found that
the majority of program funds were spent by grantees in the areas of
academic quality and student support.
GAO also reviewed the Department's monitoring of grantees under
these programs. Historically, grants were monitored using several
methods including site visits, reviews of annual and interim
performance reports, desk monitoring, and the review of information in
the Department's Grants Administration and Payment System (GAPS). In
2002, OPE began using an electronic performance monitoring system to
evaluate annual performance reports. Electronic monitoring of grants
using OPE's e-Monitoring system began in 2004. Eventually, this system
evolved into the Grant Electronic Monitoring System (GEMS), which was
introduced in 2008. Currently, an e-Folder system is being piloted to
file documents electronically, which also has the benefit of reducing
the amount of paper used. In addition, the Department has recently
introduced the G5 grants management system which is being used in
conjunction with GEMS to enhance grant monitoring.
Generally speaking, in the past, the Department did not make
frequent site visits to grantees due to lack of travel funds. As a
result, these programs were likely to be monitored using desk
monitoring and reviews of annual performance reports. OPE's Program
Monitoring Information Technology (PMIT) staff, who were trained in
performance monitoring, conducted site visits for selected IDUES grants
until 2004, when this unit was disbanded. Subsequently, OPE's Program
Oversight Staff (POS) was established to assist program offices in
their monitoring efforts. However, the responsibility for conducting
programmatic and fiscal site visits was recently transferred from POS
to the OPE program offices, and efforts are under way to enhance the
staffing of the program offices.
GAO had previously reported on the Department's administration of
Title III and Title V programs in 2004 (GAO-04-961) and 2007 (GAO-07-
926T), finding that the Department had made limited progress in
implementing initiatives to enhance grantee monitoring and technical
assistance. In the 2009 study, GAO concluded that the Department made
limited progress in improving its monitoring and technical assistance
efforts beyond what GAO recommended in its 2004 and 2007 studies, but
has not implemented a systematic approach to coordinating these
efforts. GAO also found that the Department's targeting of technical
assistance remains limited. Based on its findings, GAO recommended that
the Secretary of Education take five actions:
1. ``Develop a comprehensive, risk-based approach to target grant
monitoring and technical assistance based on the needs of grantees. In
doing so, Education should take steps to ensure that all available
tools, including its electronic monitoring system, risk-based criteria,
site visits, and grantee annual performance reports, are fully
integrated to better target its limited resources.
2. Follow up on each of the improper uses of grant funds that were
identified in the report.
3. Provide program staff with the necessary training to fully carry
out monitoring and technical assistance responsibilities.
4. Disseminate information to grantees about common implementation
challenges and successful projects to leverage the investment that has
been made across the programs.
5. Develop appropriate mechanisms to collect and use feedback from
grantees. ``
The Department agreed with GAO's recommendations.
To that end, I appreciate the opportunity to be here today. I am
happy to report that we have made progress in implementing GAO's
recommendations. Our successes include:
In response to Recommendation #1:
We have developed a Monitoring Plan to target grant
monitoring and technical assistance based on the needs of grantees. The
plan uses a comprehensive approach to assess risk so that we can better
target our resources and makes clear what the monitoring expectations
are for the service unit. The main tool for risk assessment is the
Monitoring Index, which is used to identify grantees for on-site
reviews and additional desk monitoring. Six primary indicators are used
to assess institutional risk: A-133 Audit findings, a missing A-133
Audits, accreditation issues, a commercial credit score class of 4 or 5
(severe delinquency measure), evidence of route payment/reimbursement
(payments are routed to program office for approval), and inclusion in
Federal Student Aid's (FSA) on-site review list. For FY 2010, we
anticipate that 50 percent of on-site reviews will be at institutions
that are deemed to be high-risk by using the Index. For FY 2010, using
the Monitoring Index, 64 institutions have been identified as high
risk, with 32 of those being Title III or Title V grantees. In addition
to developing the risk-based criteria, we have expanded the use of
OPE's GEMS which is used for post-award monitoring and recordkeeping,
including the tracking of on-site monitoring review findings and
reports and e-Folders. Desk monitoring by program officers, including
using the Annual Performance Report (APR), as well as the targeted use
of travel funds, are other methods by which integrated targeting of at-
risk grantees for monitoring and technical assistance is achieved. It
should be noted that APRs are transferred from the web-based APR system
into GEMS for all open grants.
We are planning to conduct 10 more site visits for Title
III and Title V programs in FY 2010. One site was previously identified
by GAO (three have already been visited), 2 were identified through an
IG complaint, and 5 were identified through the Monitoring Index. In
addition, we are pairing experienced staff with new staff on site
visits as part of new staff training initiatives.
We are tying our resource allocation to risk by focusing
our resources on grantees that need enhanced monitoring.
In response to Recommendation #2:
We are making progress in following up on GAO's findings
of the improper use of grant funds at four institutions. We visited one
institution, Wiley College, in November 2009. The site reviewer found
that the College had made improvements in the areas addressed in GAO's
findings, and found no evidence of policies, procedures, or activities
that did not comply with applicable Federal laws and regulations. We
visited two other institutions, University of Sacred Heart and Morgan
State, and reports are being prepared by the site visit teams.
Riverside Community College was scheduled to be visited May 16-21,
2010, but the site visit was postponed due to a scheduling conflict. A
new date has not been scheduled. It is expected that the site visit
will be completed by August 30, 2010.
In response to Recommendation #3:
With regard to training, as I mentioned earlier, new
program officers are paired with more experienced program officers as
part of the new staff mentoring process. Also, in anticipation of
several new hires in FY 2010, a comprehensive orientation process is
being developed.
IDUES staff participated in training specific to improving
their staff monitoring and technical assistance responsibilities that
included ``Programmatic Site Visit Training'' and ``Fiscal Monitoring
Training.''
Department -wide training to improve monitoring skills is
also being developed by the Department's Risk Management Services,
which will include ``Grants Management Training.'' Employees are also
able to participate in Basic Federal Accounting classes and are
required to take ``Internal Controls'' training.
In response to Recommendation #4:
IDUES held a project directors' meeting in March 2010 in
Washington, DC that was attended by over 1,000 Title III and Title V
project directors and personnel. The agenda included program-specific
discussions and project presentations. Our plan is to have an annual
project directors' meeting for these programs.
In response to Recommendation #5:
The Department has provided an e-mail address that allows
grantees to provide anonymous feedback. The e-mail address appears on
all IDUES grant program websites. As of March 1, 2010, 8 Title III and
7 Title V-related e-mails were referred to the IDUES service director
or a staff member for response.
In sum, we have made good progress in improving our ability to
monitor and provide technical assistance to Title III and Title V
grantees and we will continue to expand our capacity to do so. The
changes we are making should result in better information with which to
provide oversight to these programs. I would like to conclude this part
of my remarks by emphasizing that we will continue to implement GAO's
recommendations in the coming months and years. Our ultimate goal is to
increase the number of students accessing and completing a
postsecondary education. MSIs play a critical role in our achievement
of this objective.
Status of the Transition to the Direct Loan Program for Title III and
Title V Institutions
As you know, the SAFRA, which was included in the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152), provides
that, after June 30, 2010, no new student loans will be made under the
Federal Family Education Loan (FFEL) Program. Therefore, beginning July
1, 2010, all new subsidized and unsubsidized Stafford Loans made to
students, PLUS loans made to parents and to graduate and professional
students, and consolidation loans will be made under the William D.
Ford Federal Direct Loan Program.
The Department is closely tracking the transition of Title III and
Title V institutions into the Direct Loan Program and, by all accounts,
the transition of these institutions is going well. A number of these
schools have been processing Direct Loans already. In October 2009, we
identified all schools that were still processing only FFEL Program
loans and identified which of those schools were Title III or Title V
institutions. As of May 20, 2010, of the approximately 300 institutions
that meet the definition of a Title III or Title V institutions:
121 schools need to transition to the Direct Loan Program
(the rest are already participating)
All 121 of these schools have submitted their notice of
intent to participate in the Direct Loan program
118 of these schools already process Pell Grants
106 schools have attended training
94 schools have tested for 2010-11.
Tracking Major Milestones
The Department tracks each major milestone that Title III and V
schools need to complete to participate in the Direct Loan Program to
help gauge direct loan origination readiness and to ensure that all
students who need a loan will receive one. These milestones include:
1. Submission of ``Intent to Participate'' in the Direct Loan
Program. Prior to the law being passed, each school interested in
participating in DL had to submit to the Department a notice of its
intent to participate in the Direct Loan Program. The initiation of
this process triggers the assignment of a Point of Contact (POC) in the
Department's office of Federal Student Aid (FSA) to help the school
with Common Origination and Disbursement (COD) options, training, and
testing. After the bill was signed, the Department identified the
schools that had not submitted an Intent to Participate, assigned the
POC, and the POC contacted each school. Moreover, Dr. Joel Harrell,
Director of the Special Initiatives Service, has assigned one of his
staff members to each Title III or Title V school that is transitioning
into the Direct Loan Program. The COD POC staff and the Special
Initiatives staff work closely together to assist schools in
transition.
2. Schools Already Processing Pell Grants. The Department is
tracking each institution that is already processing Pell Grants
through the COD System because this is an indication of their
capability to process a Direct Loan.
The COD System contains a ``Common Record'' that is used by all
schools for submitting Pell Grant transactions to the Department. This
same Common Record is used by schools to submit Direct Loan and other
Title IV program transactions to the Department. Different data need to
be submitted on the Common Record (Promissory Note status, Origination
fees, etc.) that are specific to a Direct Loan. However, the record
itself and the types of edits and rejects generated by a Direct Loan
transaction, are much the same as the edits and rejects generated by a
Pell Grant transaction.
3. Training Attendance. The Department is tracking whether Title
III and Title V school officials have received any FSA Direct Loan
Program training.
4. COD Testing. The Department tracks whether a school has tested
with COD or whether the school's software provider has tested with COD.
Testing allows a school or their software provider to send records to
COD and see if the record is accepted. Testing assures the school that
the direct loan record format is correct and that the schools software
can successfully send and receive direct loan transmissions to and from
COD.
5. First Batch Monitoring. The Department monitors each school's
``first batch,'' which means that when a school is prepared to start
processing direct loans, staff check to be sure that the school's first
batch of direct loan records is successfully transmitted to FSA. If
there are rejects, staff works with the school and the school re-
submits the student records until all are successfully transmitted.
Direct Loan Transition Training
Besides the many Direct Loan webinars, Regional Training, and
association meetings in which training has been made available to
schools, other training opportunities have or will be provided:
FSA Staff have visited 3 of the 4 tribal institutions that
participate in the student loan programs and provided default
prevention training.
On-site visits from the Special Initiative team have
provided training support where needed.
The Special Initiatives team follows the above milestones
carefully and, if a school has not attended training, they work with
the school to ensure that it registers for training.
COD staff worked directly with groups of HBCUs in the
Atlanta area to provide training and other support.
On May 18-21, the Special Initiative staff, along with
Training officers in the Denver Regional Office, sponsored an annual
Tribal College workshop in the Denver Regional Office. The workshop
included additional discussions and training with the 4 Tribal Colleges
and Universities that participate in the student loan programs.
From May 18 to June 28, the Department will present the
HBCU Summer workshop series. These are one-day workshops across the
southeast, east, and southwest areas of the country. The workshop has a
module devoted to Direct Loans.
In February, training was provided in three Puerto Rico
cities. 90% of the Puerto Rican schools use the EDExpress product to
process Title IV aid. The training provided information on Direct Loans
and COD with a heavy focus on EDExpress as well as providing hands on
training with the EDExpress tool. The training was done in Spanish.
A full day of training is scheduled in the Dominican
Republic for domestic schools that are in the Caribbean area.
To summarize, the Department has taken a comprehensive and
proactive approach to assisting the Title III and Title V institutions
in the transition to the Direct Loan Program. We believe that all of
these institutions will be ready and able to begin processing Direct
Loans for their student borrowers for the coming award year.
I would be pleased to respond to any questions that you might have.
______
Chairman Hinojosa. Thank you.
I would like to begin the questioning, and my question will
be to George Scott.
Mr. Scott, the GAO has done many programmatic and fiscal
reviews of institutions. In your experience, have you seen
whether on-site reviews are more effective than electronic
monitoring by the sponsoring agencies? And as part of that
question, is it more productive to have a combination of
methods or is there a point at which costs become the
determining factor in oversight?
Mr. Scott. Mr. Chairman, given the limited resources that
Education faces, we certainly believe it is important that the
agency have a range of tools at its disposal, including the
electronic monitoring capability.
That said, though, it is not just important to have a
capability. It is how you use the information that is generated
from the various systems that the Department has available.
That is why I believe it is very important that they continue
to develop a risk-based approach so they could best target the
limited resources to those institutions that present the
highest risk to the program.
Chairman Hinojosa. Is there enough money in the budget to
be able to send monitors to campuses?
Mr. Scott. We didn't look at the resources broadly
available to the office that conducts these oversights. We will
note that the number of program officials in that office have
been relatively flat, I believe.
That said, despite the limited resources, it is always
important for agencies to continue to look for opportunities to
improve the effectiveness and efficiency of the activities,
given the limited resources that are available to them; and
that is why we have continually been pressing the Department to
make sure it is fully utilizing the tools it has and making
sure that it fully addresses skills gap among its staff so that
it be best prepared to provide effective oversight and
monitoring of these institutions.
Chairman Hinojosa. And my last question to you, sir, is
Title III and Title V institutions are eligible to participate
in the direct student loan program. With billions of dollars
flowing to these institutions over the next 10 years, what
recommendations do you think are absolutely necessary for the
Department to conduct high-quality financial site visits and
electronic monitoring so that we can have a good grasp of how
the use of these fiscal resources is being done?
Mr. Scott. Mr. Chairman, thank you for that question.
As I said in my statement, it is most important for the
Department to develop a comprehensive risk-based approach to
targeting these institutions. In the long term, it is really
going to take a sustained focus and long-term commitment to
develop and maintain such an effective monitoring program. I
think the prior GAO recommendations will provide a good road
map that the Department can take and use to start to improve
and continue to improve its oversight. So I believe that to the
extent the Department starts to fully implement the various
recommendations that we previously laid out, I think that is a
good start for how they can improve their overall oversight.
Chairman Hinojosa. Thank you.
Mr. Shireman, I see that you gave us some good, effective
numbers that I can relate to; and I will ask you some
questions. The GAO reported that 44 percent of students
enrolled in eligible MSIs received PELL Grants compared to only
26 percent of students at ineligible institutions. Does the
Department have evidence that the students receiving the PELL
Grants at MSIs depend on the funds for access, persistence, and
graduation?
Mr. Shireman. Certainly students that receive PELL Grants
are relatively low-income and so those funds help them to be
able to afford tuition, to be able to focus on their studies
without having to work excessively that might undermine their
ability to persist in college and graduate. So we think that
those PELL Grants are a very important tool for the students
and institutions to promote enrollment, retention, and
graduation.
Chairman Hinojosa. Well, it is cost efficient to allocate
your oversight resources according to those institutions who
are showing risk factors. It is also important to allocate
resources to disseminate the findings so those institutions are
having success in highest-quality performance. So my question
is, does your management staff try to balance your resources
for both purposes?
Mr. Shireman. Certainly we are enhancing our efforts in
that area. The first big example of this was the project
director's meeting of more than a thousand participants in
March to share best practices. That not only helps the
institutions to hear from each other and hear about best
practices. It helps our program officers to hear about what is
going on in institutions around the country so that when they
are working with an institution they can cite examples and they
can connect people to leaders of other institutions who might
be able to assist them in implementing best practices that have
been implemented at that other institution.
Chairman Hinojosa. My time has run out, and so I am now
going to recognize Mr. Guthrie.
Mr. Guthrie. Thank you very much.
Thank you, Secretary Shireman. I have a couple of
questions.
One, in your testimony, you talked about implementing the
recommendations from the report. Are you all planning to--the
Department planning to fully implement all recommendations from
the 2004--and, if so, what is the timeline in that respect?
Mr. Shireman. I believe so. I would need to take another
look at each and every line in the report to see if there are
maybe some things that might be difficult to implement. But
certainly the thrust of everything in that report are things
that we know need to be addressed.
Mr. Guthrie. Do you know when? I mean, what your time line
is?
Mr. Shireman. Well, some of this is about being a learning
organization and getting better and better. So we have already,
for example, implemented a monitoring index. We will learn over
time whether that can be improved. So in some ways it is an
ongoing type of process.
Mr. Guthrie. So you don't have recommendation this and here
is the timeline to do that?
Mr. Shireman. I certainly expect that this fiscal year we
will be largely--we will largely have complied, addressed--I
mean, we will have visited all of the institutions where there
were questions about spending that was inappropriate. We will
have increased the number of site reviews, implemented
training, you know. Then, beyond that, we need to get better,
because that won't be enough. I mean, I would agree with the
comment that we made a good start, but there is still more to
do.
Mr. Guthrie. I do have a question. It was in your written
testimony, actually. And you talked about the Department has a
special initiative team, and that is being disbursed to help
schools transition to the direct loan program. Who is on the
team and who is the team made up of and what is their special
purpose?
Mr. Shireman. A team led by Joel Harrell, who is in our
Atlanta office, experienced and knowledgeable with the
financial aid programs, as well as MSIs, and well known in the
MSI community. So they are our lead in making sure that the
MSIs have the information and resources they need to be able to
implement the financial aid programs effectively.
Mr. Guthrie. There is still concern--because I want to ask
Mr. Scott a question, but we still have concern as Cash for
Clunkers all of a sudden the Transportation Department in that
case was overwhelmed with applications. We are still concerned
about what is going to happen this fall, so we are still going
to be looking at that. But I don't want to get into the direct
loan. It is a different issue for another day, but I know that
was in your testimony.
Mr. Scott, you were listening to the testimony, and you
have seen what the Department has been doing. When you see the
progress that has been made, are you comfortable with the
progress that has been made? Are you optimistic that they are
getting a handle on this situation?
Mr. Scott. As I mentioned in my oral statement, we will
continue to monitor the Department's progress in addressing our
recommendations.
One of the concerns we have is, over the years, they have
sort of made progress and then we have sort of seen regression.
So what we are looking for is a long-term, sustained commitment
to improving the oversight and effectiveness of these programs.
So that is why we are going to continue to monitor these
programs and continue to ensure the Department is making
progress.
Mr. Guthrie. Are you optimistic about that?
I know if you look at it over time--obviously, Mr.
Shireman, those guys are newer than--over time, are you
optimistic about what you have seen? Because I know you can't
be held accountable for what happened over 2 years ago, but
where we are going forward.
Mr. Scott. I certainly want to give the Department credit
for the steps it has taken recently to address our recent
recommendations. But, as I said, what we are looking for here
is a long-term commitment to improving its oversight and
monitoring of these grantees. These institutions are very
dependant on many of these funds, so it is very important for
the Department to make sure it is well positioned to both
provide the technical assistance these schools need but also
have an effective and credible oversight presence among the
grantees. So that is what we are looking for, is this long-
term, sustained focus and commitment to improving the oversight
of these grant programs and the technical assistance it
provides to the schools.
Mr. Guthrie. I think it might have been you, actually, as
well, but we had testimony from other types of schools, not in
the full committee, about just misuse of funds or
misappropriation of applications for funds. And I guess you
could go in every government department, because we all have to
watch funds and where we are going with it. So I guess my
question is, are you looking at implementation just for these
Title III and Title V schools? It seems maybe there is an
overall issue with the way funds are being spent and how we
need to monitor as well.
Mr. Scott. The focus of this study was for the recipients
of the Title III and Title V grants.
Mr. Guthrie. Are there specific unique characteristics with
these funds that have to be monitored differently? I know when
we were looking it was a different type of school and different
group before.
Mr. Scott. For these visits, we just selected a range of
schools, a total of seven, to go in and sort of conduct what we
call our financial testing and internal controls; and that is
how we identified some of the problems.
Mr. Guthrie. I guess what I am trying to point out is that
we found seven schools, had problems in four. Well, I think we
had a different class of schools, a different group of schools,
and we can have problems there. So it is not just these
particular schools have problems. It seems like it is more
widespread with other type of issues as well.
I just want to say that specifically for the historically
black college or at least Title II and Title V schools, it is
not unique to these types of schools, we seem to have them in
other schools as well. I think it was prior to we were looking
at some ways some things were done. I think you testified on
that, actually.
Mr. Scott. Yes.
Mr. Guthrie. Thanks.
Chairman Hinojosa. At this time, I would like to recognize
the gentlelady, Congresswoman Davis from California.
Mrs. Davis. Thank you, Mr. Chairman.
Thank you to both of you for being here.
I wonder if you could just talk a little bit more about
staff training for this and what is required and whether you
feel more confident. In fact, I understand there has been more
training, but how are you actually monitoring that people are
getting that? And for those who are engaged in the process who
have not been especially trained, how do you then have
confidence that they are really looking for the right things
and being able to pull out what is required over and above even
the actual--like the actual technical criteria that you are
looking at?
Mr. Shireman. Well, we have implemented an orientation
training process and then, as I mentioned, pairing new program
officers with experienced program officers. Also, providing
this opportunity for institutions to provide anonymous input to
us, which gives us a greater opportunity to hear about
situations where perhaps they are not getting clear answers but
may be reluctant to raise that directly with the staff.
And I would say there is also an internal effort more
broadly than this office to create a more supportive
operating--it is no secret that the staff satisfaction surveys
government-wide, our Office of Postsecondary Education overall
comes out relatively low government-wide. And that is an issue
that we have from the very beginning of the administration been
taking on and trying to--doing what we can to build the kind of
camaraderie and feedback and leadership that is needed so
people aren't just focused on checking the boxes to get through
the day, but that we are tapping into their creativity to think
about how can we help these institutions improve, what are the
lessons that we can share, they want to do those things.
Mrs. Davis. How important is that to the monitoring effort
itself? I mean, do you see that as a fairly significant issue,
that there should be a high enough satisfaction level? And I
guess looking at whether or not people feel overwhelmed by the
number of institutions that they have to be evaluating, is it a
matter of not being able to have enough time with each one?
Obviously, you are not getting to all of them.
Mr. Shireman. And this is part of the reason for the
targeting efforts and why GAO's assistance here in recommending
that we use tools to help target our oversight, so that we can
identify through our monitoring index, through the annual
performance reviews the institutions where our time could be
used most effectively and can more easily determine the
institutions that perhaps don't need that time and effort. That
will also help us to identify where we might need to enhance
staffing levels either temporarily or over the long term.
Mrs. Davis. Mr. Scott, this obviously was mentioned in your
report as well, and you referenced it. How critical do you see
that to the overall need to improve in this area?
Mr. Scott. I certainly believe that continuing to enhance
the technical proficiency of the staff to conduct these reviews
is very critical.
As we mentioned, we went to a school that the Department
had previously gone to not too far ahead of when we went; and
our staff found significant problems where the Department staff
found none. And so to that extent I think it does point to the
importance of continuing to develop both programmatic and
fiscal review proficiency among the staff at the Department. It
is critical that you not only do the visits but you do them in
such a way that provides you some assurance that grant funds
are being properly used.
So I believe staff training and commitment to staff
training and skilling up the people at the Department is very
critical to whether or not they are going to succeed in
providing sufficient oversight of these grants.
Mrs. Davis. Are we looking to the right people to be in
those positions?
Mr. Scott. Now, that is a questions I will hand over to Mr.
Shireman.
I think it is important--strategically, it is important for
the Department to, first of all, identify what the critical
needs are in terms of the professional competencies that are
important for the staff to have, ensure that you recruit people
with those competencies, and then support them through the
professional development and training.
Mr. Shireman. And those are the kinds of things that we
have been looking for in our recent hires, and then also
providing the kind of targeting training, like the mandatory
training around internal controls, so that even if they are
going mostly to share best practices they can be looking for
the issues that might relate to----
Mrs. Davis. I guess the question was, does this
compensation align with the requirements that you are looking
for?
Mr. Shireman. I haven't looked at that specifically, but it
is designed to, in terms of the kind of background that we are
looking for from folks and their experience on the scale is
supposed to match up.
Mrs. Davis. Thank you.
Chairman Hinojosa. The gentlelady's time has expired.
At this time, I would like to recognize Mr. Roe from
Tennessee.
Mr. Roe. Thank you, Mr. Chairman.
I guess the way I am going to approach this is what is the
problem; and the problem, as Chairman Hinojosa pointed out, is
that we need to have more minorities and Hispanics attending
colleges and to support that. And the goal at present, which is
to have the highest graduation--college graduation rate in the
world by 2020 is a noble, tremendous goal. So those are our
problems.
Chairman Hinojosa has also accurately pointed out he has
supported this, and we have gone from 200 something million to
over two-thirds of a billion dollars. That is a 20 percent
increase per year in funding for these programs.
And I know you all are into the oversight. Mr. Scott, I
know you are. But the idea I would look at is we are looking at
graduation rates, and in the last 10 years has that changed for
retention and graduation rates? In other words, we are putting
this money in there. Has it actually worked? I haven't heard
anybody mention that.
I have known that we bought T-shirts and GPS systems and
all that, and rightfully so to look at that to see that we are
not wasting the money. But has the goal been accomplished? And,
if not, why hasn't it been accomplished?
Mr. Shireman. We absolutely have not seen the kind of
progress in graduation rates, retention rates that will get us
to that 2020 goal. And that is a large reason why we have
elevated this, the whole issue of completion and persistence.
And as we continue to implement existing programs and any new
programs that we do need to take a serious look at how do we
help institutions learn from each other, implement best
practices, improve the number of students that are being served
and who actually reach graduation.
Mr. Roe. And as we have I think 511 schools that have
received grant money, there have got to be some in there that
are doing better than others; and I would be looking at those,
I would think. And continuing to pour money at schools that are
not succeeding, I would say either you get up to these
practices or the money cuts off. I think that is where you
really hit the nail on the head. As of right now, I don't know
whether we are going up or down with this.
I would like to point out that Tennessee didn't have any
deficiencies. I would like to add that, Mr. Scott. But if you
are looking at that 7 out of 511, is it a systemic problem or
is it just not doing the job well, not monitoring the money
well?
Mr. Scott. The scope of our work in those financial reviews
is very limited, so we can't sort of extrapolate the results of
those studies to the broader pool of grantees.
I would note, however, that some of the potential abuse or
misuse of funds that we did identify were rather substantial;
and from our perspective that increases the importance of the
Department ensuring that it has an effective oversight
mechanism in place for these grantees.
Mr. Roe. Mr. Chairman, you are going to be leaving the
Department soon, I hear, and will you remain on as a consultant
to the Department of Education or transition into the private
sector?
Mr. Shireman. I have made--the big decision I made was I
shouldn't make any big decisions until I am back home in
California, so I will be figuring that out.
Mr. Roe. If you do--and, obviously, I know you will be glad
to get home--but will there be any post-employment restrictions
on what you can do outside?
Mr. Shireman. There are restrictions. I would be glad to
get you whatever information about that, things like lobbying
the Department of Education or things that I would not be
allowed to do, as I understand the agreement.
Mr. Roe. And I think the other thing, Mr. Chairman, and I
certainly appreciate your--I come from an area, rural area in
Tennessee, that we certainly need to increase not only minority
but everyone in college. I mean, we really have a huge
challenge in America of getting our educational level up for
college.
If you look at what every business will tell you, it is
workforce development, workforce development, workforce
development. They tell you that all the time. It is not
salaries that are getting our jobs going overseas. It is the
ability of our workforce to be able to do the job.
And I think the concern I have in listening to this is, is
all this money we are spending achieving the goal we want? I
know that wasn't your purpose here, but of those 511 schools,
universities, colleges, and technical schools--I am sure they
got this--there are some that I bet you are doing a pretty good
job. Did you identify any of these, Mr. Shireman?
Mr. Shireman. That is certainly part of our effort, for
example, around the conference, was to highlight best practices
at different institutions, efforts where schools have been able
to improve persistence and others can learn from that.
But I would agree with the overall framing from Chairman
Hinojosa about accountability. We do need to improve our
accountability overall both for the use of the funds but also
for the ongoing improvement that we absolutely need.
Mr. Roe. Is there a mechanism now in place to do that so we
can see the institutions that are doing well? Do you know if
there is a system?
Mr. Shireman. We receive annual performance reports from
institutions lined up against the goals that they set out for
their grants. So that is one tool, that we have to identify
institutions that are and aren't making progress. That helps us
to then target our assistance but also identify those projects
that perhaps can be shared more broadly.
Mr. Roe. Thank you, Mr. Chairman.
Chairman Hinojosa. Before I recognize the next Member of
Congress, I wanted to say to Mr. Roe that, coming from an area
that is 80 percent Hispanic, an area that I had to go to court
and sue the State of Texas for not investing in regions like
mine and other Members who serve deep south Texas, the
difference has been that, instead of putting up with three
decades of double-digit unemployment by investing in colleges
and universities, we have seen the enrollment triple and we
have seen the results of graduates where we produced just in
one college in Edinburg over 1,000 engineers. We have gone from
300 students to 1,500 students in the school of engineering.
And the same thing applies in HBCUs and other HSIs throughout
the country. But you have to invest if you are going to be able
to raise the level of education attainment and thus attract
businesses to create the jobs.
Listen, I was sworn in with a 23 percent unemployment rate.
I saw it drop down to 6 percent, after 35 years of double-digit
unemployment down to 6 percent in 2007.
So this is the best investment we can make in the future.
And I can assure you that it is crumbs compared to how much
money we are spending for all these 600 institutions who do not
qualify for a designation of an HBCU or as an HSI.
Just one example. NSF, National Science Foundation, gets $7
billion. MSIs received 3 percent of that amount of money to do
research. So we need to close the gap, and I think that what we
are doing in this committee is outstanding.
And now I would like to call on the next person. I think it
is Mr. Scott from Virginia.
Mr. Scott of Virginia. Thank you. Thank you, Mr. Chairman.
Mr. Scott, when you followed the money, did you follow just
the Federal money, the Federal grant money and not their
general budget generally, just the Federal dollars?
Mr. Scott. Yes. We just looked at the Federal money
associated with the grants at these institutions.
Mr. Scott of Virginia. Now, how did they compare--how did
the questionable grant expenses compare to other colleges and
universities?
Mr. Scott. The number of institutions we conducted
financial reviews at were seven. We found problems at four. It
was very limited in scope.
Mr. Scott of Virginia. I mean, compared to what? I mean,
you found no problems at three. So I mean if you had randomly
selected some other colleges and gone through their books, what
would it have looked like?
Mr. Scott. I can't speculate on that.
Mr. Scott of Virginia. So this might not be any worse than
anywhere else?
Mr. Scott. Well, that is why we--as part of the scope of
methodology of our report we talk about the fact that our
findings at these schools are not representative of the school
population at large.
Mr. Scott of Virginia. Or it could be that schools, all the
colleges and universities, have messed up books and this
doesn't reflect poorly on them. They are just like everybody
else.
The gentleman from Texas mentioned NSF grants. When a
college gets one of those multi-million dollar grants, isn't
there a percentage kind of set aside for administration that
the college can kind of do what they want to with?
Mr. Shireman. I know some grants work that way. I don't
know on these whether that is true.
Mr. Scott of Virginia. Well, on these, every little penny
has to be accounted for. The administration of them is on your
own dime. When you get a research grant, don't most research
grants have money you are going to account for and the other
just kind of gets dumped in the till for general administrative
expenses?
Mr. Scott. I do believe that is correct. Some of the bar
grants do have some set aside for administration.
Mr. Scott of Virginia. Now, you have all but one of the
schools at questionable grant expenses less than 10 percent. If
they had a 10 or 20 percent kind of administrative slush fund,
they would have done better than everybody else, is that right?
Mr. Scott. I just want to follow up on your question about
set-asides for administrative overhead. Staff just sort of let
me know that oftentimes it is based on the type of grant. It is
generally grant specific as to whether or not and to what
extent there is a set-aside for administration expenses.
Mr. Scott of Virginia. And what is that set-aside
percentage?
Mr. Scott. It will vary by grant.
Mr. Scott of Virginia. What does it get up to? Twenty
percent? Thirty percent?
Mr. Scott. I am not aware of that.
Voice. Ten percent.
Mr. Scott of Virginia. Ten percent? It might be 10 percent?
Mr. Scott. Generally, 10 percent.
Mr. Scott of Virginia. So if six of the seven were under 10
percent, they would be kind of in the same ball park like
everybody else that got 10 percent. If we had put in there that
you would get the grant and you could spend 10 percent for an
administrative slush fund, all but one would have been in
compliance, is that right? What are the strings attached to the
Title V grants? Are we talking about what commitment did the
school make as a condition of receiving a Title V grant? I
guess Mr. Shireman.
Mr. Shireman. The institution is required to review its
academic and fiscal needs, its situation, management
improvements that might be needed, develop plans for
improvement, identify how they intend to use the funds from the
Department of Education, and that is basically what their
proposal consists of.
Mr. Scott of Virginia. And the grant will be to fund the
proposal?
Mr. Shireman. The grant is to fund the project or projects
that they identified that emerge from the review that they have
done.
Mr. Scott of Virginia. So you can measure whether or not
they have complied with what they said they were going to do
with the money?
Mr. Shireman. We can measure whether they spent the money
on the things that they said they were going to spend it on
and, to some degree, the outcomes from that spending.
Mr. Scott of Virginia. Now, the GAO report mentions
technical assistance. What help with bookkeeping and accounting
does the Department of Education provide for colleges and
universities that may be challenged in these areas?
Mr. Shireman. I don't--I will get back to you on to what
extent that is actually--to what extent we have run into issues
around accounting and whether we have been provided assistance.
I don't know the answer to the question.
Mr. Scott of Virginia. Mr. Scott, the problems you found,
were they bookkeeping and accounting problems or theft
problems?
Mr. Scott. The problems we identified ranged as we laid out
both in the report and the testimony. Given that these schools,
you know, as part of receiving these grants, you know, have an
agreement that they will spend the money in a way that is
consistent with the grant they received. The things we found--
and referred in one case to the Department of Education
Inspector General, in other cases, we also referred them over
to the Department of Education--from our perspective were a
misuse of funds. And so were not consistent with the grant
application under which they have received the grants, and so
that is why we forwarded the information to the Department of
Education.
Mr. Scott of Virginia. If you went to the Department of
Education, that is one thing. If you went to the Department of
Justice, I think that would suggest something else.
Thank you, Mr. Chairman.
Chairman Hinojosa. The next congresswoman I would like to
recognize is Congresswoman Biggert from Illinois.
Mrs. Biggert. Thank you, Mr. Chairman. Thank you for
holding this hearing.
My question is to Mr. Shireman. You know, I share your
concern for ensuring access to higher education for minorities
and low-income students. That is why I would like to address
another group of institutions that disproportionately serve
low-income and minority students, and that is proprietary
schools.
As you know, I am very concerned about the Department's
proposal to define gainful employment based on the 8 percent
debt-to-income ratio. And, specifically, this definition would
limit access to students who are the very subject of this
hearing, because proprietary schools have a disproportionate
number of low-income and minority students.
You know, I have got several of these schools in my
district; and one of them, looking at the nursing, they decided
that they wanted to do nursing because there is such a need for
nurses. And in the last few years they have had at least 95
percent retention; 96 percent graduate, and 98 percent to 100
percent have been employed.
Now, that disclosure shows me that I think this is a school
that is doing its job, and I just see that there is almost a
discrimination against the proprietary schools and having a
limit of 8 percent. Now, this school would not be able to teach
nursing under this 8 percent rule, because you start as a nurse
at a very low level. It goes up, but it doesn't work out that
this would be possible.
So I was hoping that you would specifically address the 8
percent rule. From what I understand, the genesis for this came
from one single study in 2006 by the college board. So could
you provide the committee with a better understanding of the
full impact of this proposal?
Mr. Shireman. Thank you, Congresswoman.
During the negotiated rulemaking process, we put a number
of ideas on the table, including some around retention and
graduation and placement rates, much like the great figures you
heard from the one institution. We did raise an 8 percent
number that was cited in 2000 by the National Center of
Educational Statistics as the common rule being used by
mortgage companies in looking at student loan debt; an American
Council on Education report in 2004 that named a number of
prior reports as indicating 8 percent as a standard. So it was
the commonly used number that we put on the table for
discussion.
Since that time, we have heard much useful input from
Congress, as well as from institutions around the country. We
are considering that input.
The next phase of the negotiated rulemaking process is for
us to have a proposed rule around all of the issues that were
part of the negotiated rulemaking. There will then be further
feedback and input from the public on that proposed rule before
there is any final rule.
I can assure you that we have heard the input, are
analyzing the issues and the questions, and that there are
further steps in the process to make sure that anything is well
thought out and that the input is considered.
Mrs. Biggert. Meanwhile, this puts the schools in an
uncertain position for what is going to happen. I know that
many of us, those on this committee as well as others, met with
Secretary Duncan not too long ago; and we have discussed this
several times with him.
I worry about discrimination. For example, I have a school
such as this, and yet the colleges don't have to follow the
same rules as this. One of the colleges in my area started a
law school a few years ago, and for 2 years not one person
having gone to the college was able to pass the bar in
Illinois. This shows there is a difference. They got their
student loans without having to do something like this.
When is the notice of proposed rulemaking going out?
Mr. Shireman. I can't say for sure. I expect it in the next
few weeks, but it is sometimes hard to predict exactly when
things get through the whole process.
Mrs. Biggert. Why isn't enhanced disclosure, for example,
the numbers that I have from the school, combined with rigorous
study to determine the full extent of any student debt problem?
If people don't pass the bar, they are not going to go to that
school. And that is exactly what happened. If they don't find
employment when they go to a school that promises good return,
why is that insufficient to meet the Department's goal?
Mr. Shireman. Enhanced disclosure is among the useful
suggestions that we have gotten over the past several weeks and
is part of what we are considering right now.
Mrs. Biggert. Thank you.
I yield back the balance of my time.
Chairman Hinojosa. At this time, I would like to recognize
Congresswoman Marcia Fudge from Ohio.
Ms. Fudge. Thank you, Mr. Chairman; and I thank both
gentlemen for being here today.
Mr. Scott, you mentioned that the Department has developed
monitoring plans but that some of the activities actually lack
realistic or measurable performance goals. So on what do you
base the success or failure of programs?
Mr. Scott. A couple of examples we highlight. For example,
they have a goal of ensuring that 75 percent of the site visits
they are planning are completed. Ideally, you would like to
complete all of the site visits you are hoping to complete.
We also point to training. They are committed to providing
this training. There are not clear goals as to how many staff
are going to get the training and how they are going to assess
the effectiveness of the training. So what we are looking for
is the Department not only to have plans but to also have
mechanisms in place to hold itself accountable for achieving
these plans. From our perspective, that is an important part of
ensuring that this long-term commitment to improving the
oversight of the grantees occurs.
It is important that the Department not only hold the
schools accountable for how the grant funds are being spent but
also hold itself accountable in terms of the oversight of these
grant funds.
Ms. Fudge. Speaking to that latter point, I know over the
years there have been many, many recommendations as to how
these things could be done better. What happens to those
recommendations?
Mr. Scott. We actually track them. We track recommendations
made to agencies and completed over a number of years. At least
annually, GAO goes back to agencies and asks, what progress, if
any, have you made on these recommendations?
We have actually conducted a number of studies in this
area. Especially over the last few weeks, we have been in a
very active dialogue with the Department to understand exactly
what progress they have made on the various recommendations we
have put forward.
Ms. Fudge. Mr. Chairman, I would like to yield the balance
of my time to Mr. Scott.
Mr. Scott of Virginia. I thank the gentlelady for yielding.
Mr. Scott, the goals you have suggested are procedural
within the Department of Education. Do you have any way of
ascertaining whether the college is actually meeting goals of
educating students and graduating them in a reasonable length
of time?
Mr. Scott. Clearly, the Department, as part of the annual
performance reports, for example, can look at those reports and
determine is the school meeting the goals of the grant.
One of the concerns that we had was when we looked at some
of the annual performance reports, some of them are incomplete,
some of them had inaccurate information. There wasn't any
indication from our perspective that the Department was
regularly using these reports to help guide its oversight. I
believe the Department may be doing a better job now of using
those reports.
So our point is it is not enough just to have the tools at
your disposal. You really have to effectively use those tools
to help bolster your oversight.
Mr. Scott of Virginia. Did your analysis look into the fact
of whether the program was effective? I think you were looking
at whether the money was spent for the purpose for which it was
listed, but did you go into whether or not these programs were
effective in helping to educate the students?
Mr. Scott. No, that was beyond the scope of our study.
One of the things that it is important for the Department
to do, though, is develop outcome-oriented performance measures
that can help exactly answer that question.
Mr. Scott of Virginia. You mentioned some specific
expenditures that were questionable. One was a trip to resorts
and another a GPS. Mr. Shireman indicated that the proposal--I
assume it is a line item budget that is being funded. How was
the trip listed on the budget? What was that money supposed to
be used for and what was the GPS money supposed to be used for?
Mr. Scott. My assumption is that the money should have been
used consistent for the grants for which the school received
funds.
Mr. Scott of Virginia. You don't have the information in
front of you?
Mr. Scott. No, I don't. I don't have the actual grant in
front of me.
Mr. Scott of Virginia. So in that sense it is not a fair
question, but if somebody made an inappropriate expenditure,
the money must have come from some line item on their own
proposal.
Mr. Scott. The crack staff here behind me let me know that
the money was supposed to be spent on leadership development.
Mr. Scott of Virginia. Is that what the line item said,
``leadership development''?
Mr. Scott. There is a range of activities that the money
can be used for. The money that was in question here was
supposed to be designated for leadership development.
Mr. Scott of Virginia. Mr. Shireman, when you approve a
proposal, do you let a line item be as vague as ``leadership
development'' or do you require more specific suggestions as to
exactly how the money is going to be spent?
Mr. Shireman. I would have to take a look. I don't know how
detailed we have been in the spending plans.
Mr. Scott of Virginia. Thank you.
Ms. Fudge. Mr. Chairman, I yield back.
Chairman Hinojosa. I believe it was you, Secretary
Shireman, who mentioned commercial credit scores. I don't know
how those compare with personal credit scores. I know a 700 or
higher is considered good for a person and that over 800 is
excellent. Tell me a little bit about commercial credit scores
as they apply to our colleges.
Mr. Shireman. I am definitely not an expert on commercial
credit scores, but my understanding is that they get at
questions of how much of a risk would it be for a lender, for
example, to make a loan to that college in terms of their
likelihood over the long term to be able to repay. For anything
more detailed than that, I would be happy to look into that.
Chairman Hinojosa. Would you look into that and share that
with me?
Mr. Shireman. Sure.
Chairman Hinojosa. Not having any other members of the
committee here to ask questions, I would like to read a
statement into the record.
Without objection, I ask unanimous consent to enter into
the record a brief report from Sue McMillin, President and CEO
of the Texas Guaranteed Student Loan Corporation. Ranking
member Guthrie has been provided a copy in advance of this
request. Without objection, it will become part of the record.
[The information follows:]
Prepared Statement of Sue McMillin, President and CEO,
Texas Guaranteed Student Loan Corp.
Mr. Chairman and Members of the Subcommittee: My name is Sue
McMillin; I serve as President and CEO of Texas Guaranteed Student Loan
Corporation (TG). On behalf of TG and its Board of Directors, I am
pleased to submit to the Subcommittee, for your consideration and entry
into the record, testimony related to today's hearing on Minority-
Serving Institutions (MSIs) of Higher Education.
TG's testimony does not address directly the issues outlined in the
Government Accountability Office report Low-Income and Minority Serving
Institutions--Management Attention to Long-standing Concerns Needed to
Improve Education's Oversight of Grant Programs. Rather, TG is pleased
to provide contextual data and insights into the invaluable role of
MSIs in serving Texas students, and especially those from low-income
and first-generation college families. TG also respectfully submits its
suggestions for support services and technical assistance needed to
maximize the efforts of MSIs and other institutions in ensuring student
success and adequate administration of the federal student aid
programs.
Established in 1979, TG is a public nonprofit organization that
serves institutions and students in Texas and other states. For
purposes of today's hearing, I will focus my testimony on TG's role as
the designated guaranty agency and administrator of the Federal Family
Education Loan Program (FFELP) for the State of Texas.
TG has extensive experience working with Historically Black
Colleges and Universities (HBCUs), Predominantly Black Institutions,
Hispanic-Serving Institutions (HSIs), and emerging HSIs. TG believes
that its story of dedication to mission and its 30-year history of
service to MSIs shed a positive light on the value-added programs and
services that nonprofit entities, like TG, provide to MSIs and students
who are underrepresented in postsecondary education.
Background
The State of Texas benefits from a rich depth and breadth of MSIs.
The state is home to an estimated 47 HSIs, nine HBCUs, one
Predominantly Black Institution,\1\ and an estimated 42 emerging
HSIs.\2\ St. Phillip's College in San Antonio has the distinction of
serving as both an HBCU and an HSI. The nine HBCUs had a combined fall
2008 enrollment of 31,504 students: 62% was African American, 21% was
Hispanic, 14% was White, and the remaining 3% was composed of Asian
American and foreign students.
---------------------------------------------------------------------------
\1\ A Predominantly Black Institution is a public or private
nonprofit institution with an undergraduate enrollment composed of 40%
or greater African-American students.
\2\ Emerging Hispanic-Serving Institutions (HSIs): Serving Latino
Students. Excelencia in Education, 2010. http://www.edexcelencia.org/
research/emerging-hispanic-serving-institutions-hsis-serving-latino-
students
---------------------------------------------------------------------------
Most of the HSIs in Texas (57%) are public 2-year schools. The next
largest group (23%) is public 4-year schools, followed by private not-
for-profit 4-year schools (15%). The HSIs in Texas had a combined fall
2008 enrollment of 442,282 students: 9% was African American, 55% was
Hispanic, 27% was White, and the remaining 9% was composed of Asian
American students, foreign students, and students of unknown race. MSIs
play a critical role not only in educating the next generation of
leaders, but also in developing the intellectual and human capital of
their communities. They are critical in preparing the local and
regional workforce, and together play an important role in building a
strong economic foundation for the state.
The significance of MSIs is especially evident in the state's
master plan for higher education, known as the Closing the Gaps
plan.\3\ The Texas plan includes two notable goals: increasing student
enrollments by an additional 630,000 students, and increasing
certificate and degree completions by 50%, between 2000 and 2015. The
state's ability to meet those goals will continue to depend largely on
the capabilities of MSIs.
---------------------------------------------------------------------------
\3\ Closing the Gaps: The Texas Higher Education Plan. Texas Higher
Education Coordinating Board, 2005. http://www.thecb.state.tx.us/
index.cfm?objectid=858D2E7C-F5C8-97E9-0CDEB3037C1C2CA3
---------------------------------------------------------------------------
The graphs below (see page 5) show the target higher education
enrollments compared to actual enrollments over the 15-year period of
the plan, for the state overall, for African American students, and for
Hispanic students.\4\
---------------------------------------------------------------------------
\4\ Closing the Gaps 2009 Progress Report. Texas Higher Education
Coordinating Board, 2009. http://www.thecb.state.tx.us/
index.cfm?objectid=858D2E7C-F5C8-97E9-0CDEB3037C1C2CA3
The Challenge Ahead
For more than two decades, TG has conducted extensive research in
the areas of college access, student financial aid, and student loan
delinquencies and defaults, among other areas. Moreover, TG publishes,
in collaboration with the University of Nebraska-Lincoln, a quarterly
refereed journal on student access and success.\5\ TG's research and
experience allow it a unique window into issues and education areas
that pose potential challenges for higher education in Texas and, in
particular, for MSIs.
---------------------------------------------------------------------------
\5\ Enrollment Management Journal: Student Access, Finance, and
Success in Higher Education. http://www.tgslc.org/emj/
---------------------------------------------------------------------------
Provided below are selected findings from the February 2010 edition
of TG's State of Student Aid and Higher Education in Texas, an annual
report provided to education stakeholders and policymakers. TG found
that:
The Texas poverty rate is the sixth highest in the nation;
about 16.5% of Texans lived in poverty in 2008, compared to 12.9% of
the people in the U.S.
The child poverty rate in Texas was 22.6%, compared to
17.3% in the U.S, in 2008.
Texas ranks second to last in high school completion; in
2008, 20% of Texans aged 25 and older did not have a high school
diploma, compared to 13% of people in the U.S.
Nearly 3 million people in Texas aged 25 and older never
completed a high school education. Hispanics, who made up more than
one-third of the Texas population in 2008, are the least likely to
obtain a high school diploma. Of Hispanics aged 25 and older, 41% have
not finished high school.
Economically disadvantaged high school graduates in Texas
are less likely to enroll in college. Nearly 60% of Hispanic high
school graduates and 50% of African American high school graduates are
economically disadvantaged (as determined by students' eligibility for
free or reduced lunch).
Texas students are highly reliant on loans; in academic
year (AY) 2007-08, 65% of aid in Texas came from loans (compared to 55%
in the U.S.) and 34 % came from grants (compared to 44% in the U.S.),
including state and institutional grants.
Loan Delinquencies and Defaults
TG continuously studies and reports its findings on student loan
borrowing and repayment trends as a service to institutions and
education stakeholders and as a means of informing its own efforts in
delinquency and default prevention. TG has published and continues to
publish studies that individually and collectively examine default
rates and borrowing patterns for Texas institutions, all schools in
TG's loan portfolio, MSIs, and individual institutions. TG publishes
reports that examine short-term and long-term (over seven years in
repayment) rates for delinquency and default for its entire portfolio
and certain schools that TG serves.
One report on MSIs,\6\ attached to TG's testimony, examines student
loan borrowing among HBCUs and HSIs. When measured in both short-term
and long-term periods, student loan delinquency and default rates at
these institutions paint a picture of the continuing need to provide
support services to these students.
---------------------------------------------------------------------------
\6\ Profile of Minority-Serving Institutions in Texas: A Study of
Historically Black College and Universities and Hispanic-Serving
Institutions. Texas Guaranteed Student Loan Corporation, 2010. http://
www.tgslc.org/publications/
More than half of students who attended MSIs and went into
repayment on their TG loans in FY 2002 were delinquent on those loans
by the end of FY 2003. The delinquency rates at MSIs continue to
increase to 55% at 3 years out and 61% at 7 years out. More than 67% of
students who attended HBCUs and went into repayment on their TG loans
in FY 2002 were delinquent on those loans by the end of FY 2003. This
increased to 70% delinquent by the end of FY 2004 (3-year rate), then
to 75% by the end of FY 2008 (7-year rate).
Almost 8% of students who attended an MSI and went into repayment
on their TG loans in FY 2002 defaulted on those loans. When the
analysis is extended one year, TG finds that the cohort default rate
increases to 11.8%, and this jumps to 21.6% for the 7-year default
rate.
Again, the default rates at HSIs are very similar to the overall
MSI rates, but the rates at HBCUs are much higher than those at HSIs.
Federal Student Loan Borrowing
The chart below shows the levels of federal student loan volume
among students attending MSIs during academic year 2007-2008. Students
at Texas MSIs borrowed a total of $874.7 million, compared to $3.8
billion borrowed by students at all Texas institutions in FFELP and
FDLP.
----------------------------------------------------------------------------------------------------------------
FFELP AY 07-08 FDLP AY 07-08 Total AY 07-08
----------------------------------------------------------------------------------------------------------------
Texas Minority-Serving Institutions............................. $861,259,764 $13,485,902 $874,745,666
Texas Historically Black Colleges and Universities.............. $177,297,910 $0 $177,297,910
Texas Hispanic-Serving Institutions............................. $691,493,227 $13,485,902 $704,979,129
----------------------------------------------------------------------------------------------------------------
Median Borrower Indebtedness in Texas
Overall, the median borrower indebtedness (MBI) of students leaving
MSIs in FY 2008 was $10,375. The MBI at HBCUs was $15,000 and the MBI
at HSIs was $9,775. This difference is expected based on the dominant
school types of each group. Most of the HBCUs are 4-year universities,
mainly private not-for-profit, while most of the HSIs are 2-year public
colleges. Four-year universities are more expensive than 2-year
colleges, which accounts for much of the difference in MBI, and
students attending 4-year universities also tend to attend for a longer
time, and so end up having more years of borrowing.
Paying for College--Aid and Work
Students attending HSIs in Texas in AY 2007-08 were significantly
less likely to expect help from their parents to pay for tuition and
fees, compared with students attending schools not designated as HSIs.
Sixty-four percent of students at non-HSIs expected help from their
parents, compared to 53% of students at HSIs. The students at HSIs and
HBCUs were also significantly more likely to have a Pell grant,
compared to their non-HSI and non-HBCU counterparts (23% at non-HSIs
and 33% at HSIs; 25% at non-HBCUs and 51% at HBCUs). In line with this
finding, those students at HSIs and HBCUs had significantly lower
median incomes than their non-HSI and non-HBCU counterparts ($47,844 at
non-HSIs and $28,880 at HSIs; $40,793 at non-HBCUs and $26,991 at
HBCUs).
Students attending HSIs in Texas in AY 2007-08 were significantly
less likely to work to earn spending money compared to students
attending non-HSIs (79% versus 71%). Students attending HSIs were
significantly more likely to work to pay for living expenses compared
to students attending non-HSIs (82% versus 76%). Students attending
HBCUs in Texas were significantly more likely to work to send money
home, compared to students attending non-HBCUs (12% versus 6%).
MSIs and Student Loans
HSIs and HBCUs in Texas enroll hundreds of thousands of students
each year, with the majority of these being minority students. These
students have more risk factors that lead them to drop out of school,
compared to White students, making them more likely to default on their
student loans.
These institutions, which have traditionally participated in the
FFELP, have been able to rely on the support of their local, often
state-based, FFELP partners for the provision of support services and
programs, including delinquency and default prevention, training,
financial literacy, and enrollment management. To the extent the need
for these services will continue as MSIs fully transition into direct
lending, TG would welcome the opportunity to work with the department
to identify and address those gaps in services.
TG's experience with HBCUs shows that with concentrated efforts, TG
can have a meaningful, positive impact in the form of lowering
delinquency and default rates. TG invites the Subcommittee to review
two reports, detailing TG's work with HBCUs beginning in 1999,
immediately after Congress eliminated the exemption for HBCUs from
federal cohort default rate sanctions established in the early 1990s.
TG asserts that these successes among HBCUs can be replicated at other
MSIs and non-MSIs.
Links to the reports are provided below:
Breaking New Ground: The Texas Historically Black Colleges and
Universities Default Management Consortium. Texas Guaranteed Student
Loan Corporation, 2004. http://www.tgslc.org/pdf/HBCU.pdf
Lowering Student Loan Default Rates: What One Consortium of
Historically Black Institutions Did to Succeed. Education Sector, 2010.
http://www.educationsector.org/research/research--show.htm?doc--
id=1169156
The following excerpt from the report by the Education Sector
captures adequately the challenge faced by HBCUs and the real potential
for successfully addressing cohort defaults:
But the experience of the Texas HBCUs, along with a new
statistical analysis of cohort default rates, suggests that
dangerously high default rates for institutions that serve at-
risk students are not inevitable. From the initial financial
aid package to providing individual counseling on loan
repayment when students leave, institutions can take steps to
help students avoid default. Schools can also maintain contact
with students after they leave campus, communicating with them
about when they need to begin repayment and where they should
send their repayment checks * * *
Such `default aversion' strategies helped a number of HBCUs
significantly lower their loan default rates and avoid losing
eligibility for federal financial aid the last time the federal
government imposed tough new default rate standards. Their story is one
of teamwork, collaboration, and relationship-building and proves that
when institutions are armed with the tools, resources, support, and
commitment needed to lower default rates, they can do so successfully.
With the recent HEOA amendment and a worsening economic outlook,
all colleges can learn from the efforts of these schools. Their success
is not only applicable to other similar institutions, but to all
schools that serve those students most at risk for default and who are
committed to helping them succeed.
Default aversion strategies, moreover, are just one part of the
solution. Institutions that make increasing graduation rates a priority
will also help their students repay their student loans. Put simply,
students who graduate are less likely to default. As institutions face
the next default rate challenge, those that combine default aversion
strategies with strategies for degree completion will be in the best
position to not only reduce their default rates now and in the future,
but to improve the overall success of their institutions and their
students.
TG as a Catalyst for Success
As documented in the reports Breaking New Ground and Lowering
Student Loan Default Rates, student loan delinquencies and defaults can
be successfully managed if the federal government utilizes local
entities with the expertise, experience, and relationships with
students and schools to assist the government in administering the
federal student loan program. This is especially important with respect
to MSIs because of their unique and important role in educating many
first-generation college students from low-income backgrounds who rely
on student loans to finance their postsecondary educations.
The Texas HBCU Default Management Consortium referenced in the
above reports became a reality because of TG's support and active
participation. TG helped organize the consortium, served as a resource
to HBCUs, and designed a holistic model for providing technical
assistance and support to all institutions. At the request of the U.S.
Department of Education (ED), TG created a new program, Achieving
Systemic Default Aversion, and received ED's specific approval to use
funds from the interest earnings on the Federal Reserve Fund, from
Section 422(h) of the Higher Education Act of 1965, as amended, to
implement these strategies. The program's initial focus was on Texas
HBCUs. The chart below shows the progression of cohort default rates
among these HBCUs from FYs 1995 -2007.\7\
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\7\ Texas Guaranteed Student Loan Corporation.
TG is positioned to continue to provide these services to MSIs and
other institutions under the Federal Direct Loan Program (FDLP) or in
any future federal student loan environment. On March 5, 2010, TG
outlined its capabilities to assist institutions and began discussions
with ED's office of Federal Student Aid to identify ways in which TG
can provide needed services for the immediate challenge of helping
institutions effectively transition into the FDLP.
TG looks forward to its ongoing and future collaboration with ED
and appropriate state agencies to ensure that intermediate and longer-
term services--to include financial literacy, delinquency and default
prevention, proactive assistance toward the realization of programmatic
borrower benefits by student loan borrowers and technical assistance--
are available to all MSIs as well as other institutions. Thank you
again, Mr. Chairman, for the opportunity to submit my testimony for the
subcommittee's consideration.
______
Chairman Hinojosa. In my closing statement, I would like to
thank our witnesses for their testimony as well as my
colleagues on this committee for their questions and comments
today. This has been a very productive and informative hearing.
I commend the Department of Education for taking initial
steps to address the GAO recommendations. I am also glad to
hear that the Department of Education has been working with
Title III and Title V institutions in their transition to the
direct loan program.
As we continue to increase accessibility and affordability
in higher ed, I urge the Department of Education to act on the
GAO's recommendations and fully implement a systematic
monitoring system for Title III and Title V programs in a
timely manner. We must strive for excellence and set high
expectations for all of our postsecondary institutions if our
Nation hopes to lead the world in college graduates by 2020.
As we continue to build the capacity of MSIs, the
Department of Education must continue its effort to improve
programmatic and fiscal monitoring of grantees and provide
technical assistance to assist Title III and Title V
institutions in achieving the highest levels of quality,
accountability, and success. I cannot underscore the critical
role that these institutions play in educating large
proportions of low income and minority student populations. I
am pleased to hear we are making progress.
As previously ordered, members will have 14 days to submit
additional material for the hearing record. Any member who
wishes to submit follow-up questions in writing to the
witnesses should coordinate with majority staff within the
requisite time.
Without objection, this hearing is adjourned.
[Question for the record to Mr. Shireman and his response
follows:]
[Via Electronic Mail],
U.S. Congress,
Washington, DC, June 4, 2010.
Mr. Robert Shireman, Deputy Undersecretary,
Office of the Undersecretary, U.S. Department of Education, 400
Maryland Ave. SW, Washington, DC.
Dear Mr. Shireman: Thank you for testifying at the Higher
Education, Lifelong Learning, and Competitiveness Subcommittee Hearing
on, ``Research Examining GAO's Findings on Efforts to Improve Oversight
of Low-Income and Minority Serving Institutions,'' on May 27, 2010.
A Committee Member has an additional question for which they would
like a written response from you for the hearing record.
Representative Phil Roe (R-TN) has asked that you respond in
writing to the following question:
Mr. Shireman, as we discussed during the hearing, you are leaving
the Department soon with several outstanding student loan and higher
education issues and rulemakings that you have had significant
involvement in crafting. As you acknowledged, there are post-employment
rules and restrictions that apply to Administration personnel at your
level of seniority. Can you detail what rules and restrictions apply to
your situation and whether they limit your ability to discuss, and
possibly influence, future policy decisions after you leave government
service? Also, while you indicated you have not made any decisions on
future employment, are you in conversations with the Department of
Education about being kept on as a consultant after your official
separation date?
Please send an electronic version of your written response to the
questions to the Committee staff by close of business on June 9, 2010.
If you have any questions, please do not hesitate to contact the
Committee.
Sincerely,
George Miller, Chairman.
______
[Whereupon, at 11:15 a.m., the subcommittee was adjourned.]