Federal Reports

We performed our audit work at the Michigan Department of Education, Detroit Public Schools (Detroit), Cesar Chavez Academy, and the School District of the City of Inkster. We found that although the Michigan Department of Education performed some internal control activities and on-site monitoring related to administering statewide tests, it could improve controls over preventing, detecting, and taking corrective actions if it finds indicators of inaccurate, unreliable, or incomplete test results. Specifically, we found that Michigan Department of Education did not always monitor schools that it identified as high-risk, did not effectively use contractor-provided reviews of test results and forensic analysis to identify schools with possible administration irregularities, and did not ensure that its contractor provided timely reports on missing test materials. We recommended that Michigan (1) place schools that it identifies as high-risk for possible violations of test administration procedures on the next year’s targeted monitoring list, (2) use test results and erasure analyses to identify schools with possible test administration irregularities, and (3) ensure that its contracts are amended to include specific requirements for contractors to report missing test materials. At Detroit, we found that its building security allowed unauthorized access to test materials, that it did not retain records of its onsite monitoring visits to schools, and did not test all students in a continuous manner, which may render the tests invalid. We recommended that Detroit correct these weaknesses by (1) adequately securing test materials, (2) retaining monitoring visit reports, and (3) testing students in a continuous session and reporting any deviations from required test administration procedures.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements

FSA paid $448 million in commissions and $8.3 million in bonuses to Private Collection Agencies (PCAs) based on estimates because DMCS2 could not provide the information necessary to calculate actual commissions and bonuses. During FY 2012, FSA had individual contracts with 23 PCAs to perform collection services on defaulted student loans. PCAs are paid commissions based on successfully collecting on defaulted loans, and a PCA qualifies for bonuses based on its performance relative to other PCAs. Before it transitioned to DMCS2 in September 2011, FSA used its previous system to calculate PCA commissions and bonuses based on actual collections data contained in the system. However, as DMCS2 has been unable to produce the data necessary to calculate commissions and bonuses, FSA required PCAs to submit invoices, without supporting documentation that calculated estimated commissions, and paid estimated bonuses based on bonus payments made in previous years. We recommended that FSA calculate any overpayments or underpayments of PCA commissions and bonuses based on actual data, require PCAs to return any overpayments to the Department, address any underpayments, and require PCAs to submit supporting documentation for all commissions invoiced since October 2011.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements