site visits of agencies, observes institutional site visits conducted by accrediting agency evaluators, and conducts agency file reviews to evaluate and monitor agency compliance with the requirements for recognition.

The 1992 Amendments also substantially enhanced the role of, and renamed, the National Advisory Committee on Institutional Quality and Integrity, which is comprised principally of presidents and vice presidents of postsecondary education institutions. This outstanding group of individuals performs a valuable service for the Federal Government by giving their time and advising the Secretary on matters regarding the eligibility and certification of institutions for Title IV programs. One of their principal roles is to review staff reports concerning accrediting agencies and to make recommendations to the Secretary concerning the recognition of accrediting agencies, including recommendations to withdraw, modify, and/or place conditions on recognition.

The Department, with the assistance of the National Advisory Committee, is continuing to work with accrediting agencies to strengthen their oversight in statutorily mandated areas, in accordance with the 1992 Amendments. Prior to the 1992 Amendments, there were concerns that the agencies were not ensuring that the institutions they accredit were fulfilling their responsibility to provide a high-quality education to their students. The Department shared similar concerns. Since then, we have engaged the agencies and stressed the importance of their role with regard to ensuring educational quality. The agencies have responded by working to develop meaningful standards, consistent with the law, to assess educational programs. Although some concerns remain regarding the agencies' ability and willingness to enforce performance measure standards, we have witnessed a substantial change in behavior on the part of the accrediting agencies.

An institution must also apply to the Department for certification that it meets certain standards of financial responsibility and administrative capability. To meet these standards, an institution must, at least, demonstrate that it meets its financial obligations, provides the administrative

resources necessary to comply with Title IV requirements, has audited financial statements that indicate sufficient financial health, employs an adequate number of capable staff to administer Title IV programs, maintains records as required by the Department, and implements a sound system of internal controls.

If an institution seeking initial eligibility meets the standards of financial responsibility and administrative capability, the Department grants provisional certification to the institution. The 1992 Amendments required the Department to give a no more than probationary approval, called provisional certification, to institutions of questionable capability to ensure that those institutions demonstrated that they were capable of effectively administering the Title IV programs. After the first full award year, each new institution must apply for full certification, at which time the Department determines, based on a thorough review of the institution's performance during its first year of participation, whether to grant full certification, continue provisional certification, or refuse to permit further participation under any terms. In addition, the Department considers any review that may have been conducted by either the Department or a student loan guaranty agency. All institutions placed on provisional certification are subject to a system of expedited administrative review, which enables us to remove schools from participation quickly, should problems arise.

Institutions fully certified to participate in Title IV programs must also follow certain procedures to continue their participation. Institutions must remain licensed and accredited at all times during their participation. In addition, all institutions, as required by the 1992 Amendments, must be recertified every four years to ensure that they continue to meet the standards of financial responsibility and administrative capability. When an institution applies for recertification, the Department may: recertify the institution for the full four-year period; provisionally certify the institution if it meets most of the requirements but has some deficiencies; or deny recertification, at which point the institution's Program Participation Agreement (PPA) expires and the institution loses the ability to participate in Title IV programs. The Department may place an institution on provisional certification if the institution is experiencing problems that are

significant enough to warrant further monitoring. Again, when an institution is placed on provisional certification, the Department can remove the institution from participation much more quickly than it can remove a fully certified institution.

The Department focused its initial recertification efforts on the institutions that have previously posed concerns to the Department. Nearly 60 percent of the first 1,500 institutions that underwent recertification were selected because they met criteria that identify potentially at-risk institutions. Institutions that met these criteria include institutions that were subject to an on-site review by either the Department or a guaranty agency in the past year or did not meet the financial standards based upon an initial screening of their financial statements. Among the institutions selected for recertification last year, more than 20 percent were provisionally certified and another 10 percent were rejected altogether. In all, 531 institutions (which includes both new institutions and currently eligible institutions) are provisionally certified.

MONITORING EFFORTS

Monitoring and program reviews are other essential tools of oversight that we use to ensure accountability and compliance with the rules and regulations of the programs. Through the use of management controls, databases, legislation, and intensive reviews of at-risk institutions, we have spent considerable time and effort to substantially improve monitoring and oversight.

The Department's monitoring of institutions was assisted by the 1992 Amendments, which mandate the annual and timely submission of financial and compliance audits by all institutions. Previously, institutions submitted financial audits only after the Department detected a problem with their ability to meet the financial requirements. Annual compliance audits serve as an important tool in reviewing high-risk institutions' performance before serious problems arise. For example, findings in an institution's compliance audit may lead us to conduct a program review, in which one of the Department's 10 regional offices conducts an on-site review of an institution's participation in the student financial assistance programs. If a program review or other process check reveals noncompliance with specific program participation requirements, or

potential for significant dollar impact that is adverse to the government or harmful to students, the Department initiates corrective action to ensure that the school properly uses and accounts for Federal funds; to do so, the Department may require the institution to be paid under the reimbursement payment method, and may pursue an administrative enforcement action, including termination of the institution's participation, and, if fraud is suspected, refer the case to the Office of the Inspector General for investigation.

The Department performed nearly 900 program reviews in 1995, a 50 percent increase from 1994. We have hired additional program reviewers and significantly increased the formal training we provide to them through our new Training Academy. The Department has also implemented other measures to better target high-risk institutions for program reviews, reduce the time it takes to finalize a review, and assess only meaningful liabilities. By taking advantage of technological advances, we have refined automated techniques used to evaluate school status and provide warning signals to identify high priority candidates for review; we have supplied staff with state-of-the-art portable computers and enabled them to access Pell Grant payment information to support review activities; and we have made important improvements in the practice of statistical sampling so that our reviewers can make more sophisticated, scientifically designed assessments of the loss of Federal funds caused by institutional errors or abuse.

The Department also monitors student aid applications to prevent ineligible students, and students who provide false information, from receiving Federal funds. A number of database matches are performed for each student aid application, and many have recently been enhanced or introduced to strengthen our oversight in this area. First, each applicant's name and date of birth is now matched with the Social Security Administration's master file to verify the applicant's Social Security number. Prior to September, 1994, we checked merely to determine whether the Social Security number the applicant reported was within the valid range of all numbers issued by the Social Security Administration.

Second, since January, 1995, every applicant's name and Social Security number is checked

against the Department's National Student Loan Data System (NSLDS) to determine whether the student is in default on a student loan, or has received an overpayment on a grant and therefore owes a refund, before he or she can receive additional aid. This new data system provides more timely, accurate, and comprehensive loan-level information than was previously available through the database of loans held by the Department and the annual status reports filed with the Department by the guaranty agencies. NSLDS is also used to verify the enrollment status of student borrowers, verify that student borrowers have not exceeded statutory loan limits, and is critical in ensuring that the Federal Government does not overpay lenders for interest benefits arising from federally guaranteed loans. To date, NSLDS has identified approximately 125,000 prior defaulters among students applying for additional financial aid, preventing as much as $310 million in future defaults and denying about $75 million in Pell Grants to these ineligible students.

Third, the Department verifies the eligibility status of applicants who claim to be eligible noncitizens by matching their alien registration number ("A" number) with the Immigration and Naturalization Service. We have also implemented, beginning in January, 1996, a recommendation from our Office of the Inspector General to expand the Social Security number match to include citizenship status in order to prescreen all applicants for citizenship status rather than only those who provide an alien registration number. Finally, the Department has recently begun systematically to identify students with scheduled Pell Grants in excess of the amount allowed by law. Such excesses can occur when students transfer schools. This check will help ensure that no such student will receive an overpayment.

We are also building on the accomplishments of the Direct Loan program to use technological advances to consolidate our student aid data systems and processes. For example, we are redesigning the Department's financial and management information systems to ensure that data from accounting, grants, contracts, payments, and other "feeder" systems such as the student aid application system are integrated into one financial management system. Additionally, we are working with a diverse group of government, business, and education leaders to reengineer the