Any “ credible information ” indicating that any employee, who acts in a capacity that involves the administration or receipt of Title IV funds, “ may ” have engaged in fraud, misrepresentation, conversion, breach of fiduciary responsibility, or other illegal conduct “ involving ” Title IV programs
Standards of Administrative Capability, 34 C.F.R. § 668.16(g)
ED’s Audit Guide: Audits of Federal Student Financial Assistance Programs at Participating Institutions and Institution Servicers , Section I (January 2000)
B. Butner, “Do I Have to Be A Cop? Detecting, Evaluating and Reporting Financial Aid Fraud,” NASFAA’s Student Aid Transcript , Vol. 13, No. 3 (2002), www.dowlohnes.com/bbutner , and go to Publications list
Preventing and Detecting Financial Aid Fraud at your Campus: A Practical Approach Katherine Lee Carey General Counsel Vice President of Compliance Government Relations Officer American Career College & West Coast University
Not only does the FA leadership need to instill an ethical tone; they need to instill a sense of ownership of the fraud detection process.
Implement your Identity Theft Prevention Program (Red Flags Rule) and use the opportunity to train the FA team on the links between identity theft red flags and FA fraud red flags.
Use errors and issues as opportunities to teach the entire team. Prevent the same mistakes from reoccurring.
Don’t be afraid to discuss the criminal penalties of defrauding Title IV programs with your staff. Knowing that fraud can result in jail may deter the inclination to cross the line!
Recognizing the Signs of Potential Fraud by Students/Families
Most common types of fraud involve misstating income and the number of dependents in school
US ED did an audit of the 1995-1996 PELL recipients and found 4.4% (about 100,000) had reported lower income than was reported to the IRS.
Follow up if the income reported:
Is a round number (who earns exactly $15,000 a year, on the dot?)
Does not include child support/ alimony received when the custodial parent is a female. (This doesn’t always mean anything, but it is worth double checking.)
If the family filed a paper return (not e-filed) and it appears that they are providing you a copy of an original, or an original itself, be very suspicious. They may have created a new return for purposes of defrauding Title IV.
Put the fear of GOD (or at least ED, OIG and IRS) in them…
If you suspect fraud, inform the student/family that:
ED will compare the FAFSA info to the IRS forms they submitted.
There are strict penalties for fraud – and failing to report assets and income is fraud!
If a student begins school with fraudulently obtained financial aid, s/he can be expelled.
Fraud will be reported to the OIG. That means an investigation by a division of the federal government that could lead to criminal charges and prison. (Even worse? It could lead to an IRS audit!!!)
Tips for Detecting Fraud within the FA Department
Remember that fraud isn’t always committed by the student. You have to be watchful for signs of fraud on your team as well:
During document review processes, check to see if handwriting on a completed application is the same throughout. Sometimes info “added” later was not authorized by the applicant.
If a new dependent has “appeared” on an application, and the name is written with different handwriting, follow up. Compare to W-2s.
Pay special attention to photocopies or documents (like SS cards, W-2s or 1040s) that appear to have been altered.
Be wary of any inappropriately close relationships between FA staffers and individual students, or if a staffer seems to be pushing harder than normal for additional funds for a student.
If you have set accountability for compliance in your department, spotting those who are “working the process” should be a little easier…
If a staffer seems to be trying to skirt the normal process, or taking a new document to numerous people seeking approval, check to see why. It is possible that s/he did not get the answer they wanted, so they are shopping for someone who is not paying attention!
When your team feels empowered to ask questions of each other – this type of behavior will be noticed.
As a leader, set a good example. Be ethical and your team will follow.
Set expectations of compliance and train to those expectations.
Provide accountability for compliance.
Use mistakes, issues and verifications as training opportunities.
Report suspected fraud to the ED OIG (as explained by Blain), even if no funds were disbursed.
U.S. Department of Education Office of Inspector General Investigation Services
2009 National Conference
July 14, 2009
Neil E. Sanchez
Supervisory Special Agent
The Act established the Office of Inspector General in the U.S. Department of Education to prevent and detect fraud, waste and abuse and improve the economy, efficiency and effectiveness of Department programs and operations. Inspector General Act of 1978
ORGANIZATIONAL CHART Part of the Department BUT… Independent
ED/OIG Mission Statement To promote the efficiency, effectiveness, and integrity of the Department's programs and operations, we conduct independent and objective audits, investigations, inspections, and other activities.
U.S. Department of Education Office of Inspector General WESTERN REGION Sacramento, CA Long Beach, CA & Denver, CO CENTRAL REGION Chicago, IL; Dallas, TX & Kansas City, MO SOUTHEASTERN REGION Atlanta, GA; Pembroke Pines, FL & San Juan, PR MID-ATLANTIC REGION Washington, DC Philadelphia, PA & Pittsburg, PA NORTHEASTERN REGION New York, NY & Boston, MA
Any person who knowingly and willfully embezzles, misapplies, steals, obtains by fraud, false statement or forgery, or fails to refund any funds, assets, or property provided or insured under [Title IV, HEA] or attempts to so embezzle, misapply, steal, obtain by fraud, false statement or forgery, or fail to refund any funds, assets, or property, shall be fined. . . or imprisoned . . . .