39. Handwritten, signed statement prepared by Sara Hoffman, dated Au- 41. Correspondence between Permanent Subcommittee on Investigations poena 42. Auditor's Reports and Examinations (2) of Bais Fruma's participation in the Student Financial Assistance and Pell Grant Programs, prepared by Samuel Kohn, CPA, for the periods July 1, 1987 through June 30, 1989, and July 1, 1989 through June 30, 1991 and supporting workpapers 43. Selected documents from Bais Fruma's files on Eligibility and Certification with the U.S. Department of Education 44. Bais Fruma's Self-Directed Study Program-Academic Bulletin, 1991– 1993 45. Letter, dated September 24, 1993, to Alan Edelman, U.S. Senate, Permanent Subcommittee on Investigations, from Fred E. Nussbaum, CPA, Brooklyn, New York, regarding accounting workpapers for Bais Fruma for the fiscal year ended August 31, 1992 46. Two (2) Bais Fruma Auditor's Report and Examination of the Pell Grant Program, July 1, 1987 through June 30, 1989 and July 1, 1989 through June 30, 1991, prepared by Samuel Kohn, CPA 47. Bais Fruma Financial Statements, August 31, 1990 and August 31, 1992, prepared by Fred E. Nussbaum, CPA 48. Letter, to Mr. S. Waldman, Bais Fruma, dated November 30, 1992, from Victoria Edwards, Acting Chief, Audit Resolution Branch, Institutional Monitoring Division, U.S. Department of Education, regarding audit report of Bais Fruma's Title IV Student Financial Assistance Programs 49. Analytical Self-Evaluation Report, Presented to Accrediting Commission for Continuing Education and Training by Bais Fruma, April, 1991 50. Bais Fruma's Cash Disbursements Journal, September 1, 1991 to August 31, 1992 51. Signed blank Pell Grant Applications and Bais Fruma documents from the office of Jacob Ginzburg programs 52. 1992-1993 Molloy College Catalogue of graduate and undergraduate 53. a. Correspondence between Molloy College, the U.S. Department of Education, and the New York State Department of Education, dated April-October 1993, regarding 1993 Program Review Report and Audit Report conducted by the U.S. Department of Education and the New York State Office of the Comptroller b. SEALED EXHIBIT: State of New York, Office of the State Comptroller, 1993 "HESC-TAP/Preliminary Audit Finding/Molloy College/Report 93-T-7" 54. a. "Memorandum of Understanding Between Molloy College and The Academy for Jewish Education," dated November 10, 1987 b. "Memorandum of Understanding Between Molloy College and Long Island Seminary of Jewish Studies for Women," dated November 10, 1987 c. Boiler plate "Memorandum of Understanding" used by Molloy College 55. List prepared by Molloy College showing contacts for each Molloy College off-site location, dated May 26, 1993 56. List prepared by Molloy College of suggested course of study for Fall 1991 Semester of the Associates Degree Program for Recent Immigrants 57. List prepared by Molloy College regarding enrollment, withdrawal, and percent completion rates for each off-site location for the Associates Degree Program for Recent Immigrants, dated Fall 87 through Spring 93 58. List prepared by Molloy College of total Pell Grant awards, total offsite institutional aid and total funds received by Molloy College from each off-site location for the Associates Degree Program for Recent Immigrants. Page 278 279 294 Page 1993 59. List of Molloy College On-Campus Institutional Aid for the years 198360. SEALED EXHIBIT: U.S. Department of Education Pell Grant Program Student Payment Summary for Molloy College for the 1992-93 school year 61. SEALED EXHIBIT: Molloy College list of 1992 student assistance awards for the Institute for Refugees from Eastern Europe 62. "Metropolitan Education Center (M.E.C.)-Mentoring Program" booklet 63. Resumes of adjunct lecturers employed by Molloy College in their Associates Degree Program for Recent Immigrants. 64. Correspondence between Molloy College and Off-Site Administrators, dated January-June 1993, regarding continuation of Associates Degree Program for Recent Immigrants for Fall-93 Semester 65. Commission on Higher Education of the Middle States Association of Colleges and Schools' Evaluation Team Report of Molloy College (October 18-21, 1992) 66. Letter to the Permanent Subcommittee on Investigations, dated September 9, 1993, from Commission on Higher Education, regarding October 18-21, 1992 Evaluation Team Report of Molloy College 67. Textbooks (2) used by Molloy College off-site locations for their Associates Degree Program for Recent Immigrants 68. Listing, prepared by the U.S. Department of Education, of 21 ACCET Accredited Avocational Schools 69. Listing, prepared by the U.S. General Accounting Office, of "23 Yeshiva or Yeshiva-Affiliated Schools Investigated by the GAO" 70. Listing, prepared by the U.S. Department of Education, of 23 schools indicating level of "HEA Title IV Student Financial Aid Programs Funding: 1981 to 1993" 71. Listing of State Higher Education Executive Officers as of August 1, 1993 72. 1993 Directory of Institutions Accredited by ACCET 73. Documents provided by ACCET concerning ACCET policies, procedures, guidelines and standards governing ACCET and its accredited institu tions 74. U.S. Department of Education Pell Grant Program guidelines as of November 6, 1991 75. Memorandum, President's Council on Integrity & Efficiency, dated June 15, 1993, regarding Quality of Non-Federal Audits for the Six Month Period Ended March 31, 1993 76. U.S. Department of Education, Office of Inspector General Audit, entitled "Improvements Needed In Quality of Vocational Training, March 1987" 77. Report, U.S. General Accounting Office, "Department of Education: Long-Standing Management Problems Hamper Reforms" (GAO/HRD93-47) May 1993 78. Report, U.S. General Accounting Office, "Financial Audit: Guaranteed Student Loan Program's Internal Controls and Structure Need Improvement" (GAO/AFMD-93-20) March 1993 79. Report, U.S. General Accounting Office, "Student Financial Aid: Education Can Do More To Screen Schools Before Students Receive Aid❞ (GAO/HRD-91-145) September 1991 80. Testimony of U.S. General Accounting Office, "Direct Student Loan: 81. a. Letter to the Honorable Thomas Sobol, Commissioner, New York c. Decision and Order, State of New York Supreme Court, In the Matter 296 301 302 82. Letter to Mr. Sholom Rosengarten, Director, Beth Medrash Eeyun Hatalmud, dated June 10, 1993, from U.S. Department of Education, regarding emergency action against the school's participation in Federal Student Aid Programs 83. Letter to The Honorable Richard Riley, Secretary, U.S. Department of Education, dated January 21, 1993, from Senators Moynihan, D'Amato, Lieberman and Spector, regarding reviews of Judaic schools, and Riley's February 16, 1993 response 84. Letter to The Honorable Richard Riley, Secretary, U.S. Department 86. Fire and Incident Report, Bureau of Fire Investigation, Fire Depart- 88. SEALEĎ EXHIBIT: Listing, prepared by the U.S. General Accounting 90. Letter for the Record of Kansas Independent College Association, dated October 26, 1993 Page 343 351 453 478 91. Letter to Senator Sam Nunn, dated October 27, 1993, from Leigh M. Manasevit, Brunstein & Manasevit, regarding statement of the Council of Judiac Schools 480 92. Letter to Senator Sam Nunn, dated November 23, 1993, from Senator Claiborne Pell, in response to questions raised at Subcommittee's October 27, 1993 hearing 93. Responses of David A. Longanecker, Assistant Secretary, Office of Postsecondary Education, U.S. Department of Education to Permanent Subcommittee on Investigations' additional questions for the_record 94. Responses of James B. Thomas, Jr., Inspector General, U.S. Department of Education to Permanent Subcommittee on Investigations' additional questions for the record. 95. Department of Education submission re: "Standard In The Institutional Quality Assurance Program" 96. Correspondence between Moshe Zev Weisberg, President, Yeshiva Administrators of Financial Aid and Permanent Subcommittee on Investigations, regarding usage of term "Yeshiva" at Subcommittee's hearings *Retained in the files of the Subcommittee. 483 484 533 544 548 ABUSES IN FEDERAL STUDENT GRANT PROGRAMS WEDNESDAY, OCTOBER 27, 1993 U.S. SENATE, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS, The Subcommittee met, pursuant to notice, at 9:05 a.m., in room SD-342, Dirksen Senate Office Building, Hon. Sam Nunn, Chairman of the Subcommittee, presiding. Present: Senators Nunn, Roth, Cohen, and Cochran. Staff Present: Eleanore J. Hill, Chief Counsel; John F. Sopko, Deputy Chief Counsel; Mary D. Robertson, Chief Clerk; Ålan Edelman, Counsel; Eleni P. Kalisch, Counsel; David B. Buckley, Chief Investigator; Harold B. Lippman, Investigator; R. Mark Webster, Investigator; Scott E. Newton, Investigator; Cynthia Comstock, Executive Assistant to Chief Counsel; Declan Cashman, Staff Assistant; Daniel F. Rinzel, Minority Chief Counsel; Stephen H. Levin, Minority Counsel; W. Leighton Lord III, Minority Counsel; Carla J. Martin, Minority Assistant Chief Clerk; Mike Maloney, Senior Auditor, GAO Detail; John Forbes, Investigator (Customs); Gene Richardson, Investigator (AID); Betty Ann Soiefer (Senator Glenn); John Nakahata (Senator Leiberman); Kelly Metcalf (Senator Cohen); Paulina Collins (Senator Cohen); Doris Dixon (Senator Cochran); and Steven Burns (Senator Sasser). OPENING STATEMENT OF CHAIRMAN NUNN Chairman NUNN. The Committee will come to order. Today, the Permanent Subcommittee on Investigations begins the first in a series of hearings to examine allegations of fraud, abuse, and mismanagement in the Federal Pell Grant program. We begin this investigation with the recognition that the Pell Grant program is one of the most important Federal programs, because it enables millions of young men and women to pursue educational opportunities which they otherwise would be forced to forego because of their income levels. This is a goal which is not only laudable, but is very important to our country's future. It is a goal which I wholeheartedly support. The budgetary reality, however, is that funding for this important program is not unlimited. Indeed, due to budget constraints, the Pell Grant program, for several years now, has not been fully funded. This fact makes hearings such as these all the more necessary. Every penny of Pell Grant money wasted due to fraud, abuse, or just mismanagement, results in a direct reduction of the funds available to truly needy and worthy students. Unfortunately, today's hearings will reveal that there is, in fact, a great deal of fraud and abuse going on within this program, and, moreover, that the ability of the Department of Education to detect and respond effectively to these problems in the Pell Program has been woefully inadequate. I regret to say that I am not surprised by these revelations. In 1990, this Subcommittee held a series of hearings examining the operation of the Federal Guaranteed Student Loan program. Those hearings uncovered widespread abuse and fraud on the part of many key participants in the student loan program. In addition, the hearings revealed serious deficiencies in the role played by the Department of Education in administering and overseeing that program. As a result of those hearings, this Subcommittee issued a 1991 report entitled, "Abuses in the Federal Student Aid Programs," which was highly critical of almost every aspect of the operation and administration of the student loan program. The report contained over 25 separate recommendations for reform of the program, many of which were ultimately incorporated into amendments to the Higher Education Act, which were enacted in 1992, and some of the regulations are just being issued. It now appears that many of the same systemic weaknesses that plagued the student loan program also are undermining the Pell Grant program. Indeed, I do not believe it would be an exaggeration to say that the Subcommittee's report language on the student loan program could, with only slight modifications, apply equally as well to the Pell Grant program. As we saw with the student loan program, it appears that some of the biggest abuses within the Pell Grant program are being perpetrated not so much by dishonest students, but by dishonest schools. As one senior Department of Education official told the Subcommittee Staff: We are being beaten at every turn. The crooks open a new school, run thousands of students through their program, close their school, and retire as millionaires before they were even scheduled for a program review. In future hearings, the Subcommittee will examine in great depth the role played by the proprietary trade school sector within the Pell Grant program and allegations of abuse by that sector. Today, however, the Subcommittee turns its attention to allegations of abuses among schools of a far different nature. The focus of today's hearings will be certain not-for-profit schools, run by taxexempt religious organizations which offer so-called "Judaic Studies" and "Immigrant Culture" programs. These programs, for the most part, confer non-vocational certificates rather than bachelor's degrees, and their curriculum consists primarily of the study of religious texts and the Hebrew language. The Immigrant Culture programs also heavily concentrate on teaching basic English language skills. These programs, which have focused on attracting students from the Orthodox Jewish and Russian immigrant populations, have received hundreds of millions of dollars in Pell Grant funds over the past 10 to 15 years. Just last week, the Department of Education sent letters to 20 such schools, questioning their eligibility to participate in the Federal student aid programs because of their inability to meet certain statutory criteria. These letters were the first step toward possible |