Mr. SHAYS. No. That's all right. Mr. Bloom.

Mr. BLOOM. Thank you, Mr. Chairman and other members of the committee. It's certainly a pleasure to be here. I have with me Pat Howard from my office, who is really the student financial aid expert in my office, and he'll be here to help.

Mr. SHAYS. That has to be a full-time job.

Mr. HOWARD. Yes, sir.

Mr. BLOOM. And then some, sir. This is my first meeting with the subcommittee. I'm relatively new as the inspector general, having been sworn in in January. My learning curve is going like that [pointing upward]; we're getting there.

Mr. SHAYS. Nice to have you.

Mr. BLOOM. Thank you. I've submitted a 22-page prepared statement, which we submit for the record. And so this oral testimony will be somewhat more brief.

Mr. SHAYS. Well, we'll submit your whole statement into the record, and appreciate your summary.

Mr. BLOOM. Thank you. Mr. Chairman, I'm an accountant and a CPA by training; financial executive auditor and management consultant by profession. I've been a line manager. I've been a senior management official. So I've been there. And one of my strongest basic beliefs that I manage by and that I used to consult by, is what you measure you get. I strongly believe that. Not only is this important in the business world, but I believe that it's an important principle for Government and education.

So I want to first hit kind of the punch line of my testimony, which I have here. The punch line basically is legislative perform

ance

Mr. SHAYS. You know what I like: You're new and you came with a new idea. I have never seen anyone with a light pen able to point from the desk to there. I'm sure that happens in the private sector a lot, though.

Mr. BLOOM. All the time. All the time. Legislative performance standards are needed. They need to be quantifiable, enforced, and verified.

First of all, let me talk a little bit about accrediting agencies. You probably-this is maybe a little bit gratuitous.

Mr. SHAYS. You need to be gratuitous.

Mr. BLOOM. Yes.

Mr. SHAYS. Assume nothing.

Mr. BLOOM. Accreditation is one of the legs of the gatekeeping triad; the others being State licensure and certification. Under the current situation, accrediting agencies are arguably the most important part of that triad. Currently, the accreditation is done by private accrediting agencies that are funded by the schools that accredit them.

The 1992 Higher Education Act amendments were a great first step toward the measurement that I talk about, because, for the first time, they included a requirement for measuring student outcomes. While the amendment was somewhat vague, it certainly provided a skeleton for the Department of Education and the accrediting agencies to add meat to require quantifiable, enforced, verifiable performance standards. However, we're halfway through 1996-remember this was the act of 1992—and we're not there yet.

We do not have what I believe are important quantifiable, enforceable, and verified standards.

Now, some of the accrediting agencies are working on the quantifiable part. I want to say some because I don't believe all are. But it doesn't appear that verifiable and enforced is on anybody's radar screen just yet.

Now, I don't want to give you the impression that my friend and colleague, Dr. Longanecker, and the Department of Education have been sitting on their hands for the last 4 years. We don't believe that. There have been some great strides that have been made in the gatekeeping process, particularly in the certification area. The 1992 amendments were quite clear when they added significant financial responsibility requirements, most notably the audited financial statement requirement. And the Department has done a credible job of implementing this bright-line, statutory requirement.

Another issue that I want to talk about, the bifurcation issue, which maybe doesn't relate totally, but it's something I want to talk about a bit. I want to ask the question: Why do we regulate the receipt of public funds at, say, Yale, the same way that we regulate it at, say, XYZ Barber College? That is not how business would operate. The same lawyer who handles matters for, say, the University of Connecticut probably would handle them differently or probably wouldn't be the lawyer that worked on the barber college, because the issues are different.

The same would be true with Pitney Bowes or AT&T; they're really different industries. The business world would handle them as such.

So, I would say that we need to bifurcate our legislation and regulation in the way that it more meaningfully reflects the kind of education being given.

Now, to better illustrate the nuance of goals and standards in verifiable and enforceable, very quickly this morning, we put together this chart that we think is a continuum. We do not believe that it's it's not 100 percent audited-but we think it shows the point in the difference between what we think is a weaker requirement all the way to what we believe are very strong requirements. For instance, a goal or a guideline would say, we ought to strive to have a graduation and a placement rate of 70/70. Let's strive to do that, and we expect continuous improvement. Fairly vague.

Now, a standard might require the 70/70, and it might say, if it's not met, you really need to have an improvement plan. And failure to comply, in the long run, we'll kick you out of the program.

A verifiable, enforced standard would again be a mandatory 70/ 70. It would say something to the effect of, if you don't fix it in 12 months, you're out, period, and that the data needs to be independently verified.

Now, if I had to put on this continuum where I believe the dif ferent factions are at this point—and, again, this is the new guy's guess I would say that the accrediting agencies are closer to the weak side, that the Department is kind of in the middle, and what we believe is probably not as draconian as others might say, but certainly on the strong side. And that's pretty much what we would propose.

Now, before I conclude, I want to make two additional points. First of all, we are not suggesting that schools that cannot meet the standards should have to shut their doors; we're not saying that. If there is a market out there for their services, so be it. But we believe that if Federal funds are involved, we need to have quantifiable, enforceable, and verifiable standards.

The second point is that while bright-line default rates are doing an excellent job of removing some of the not so productive schools out of the student loan program, many are still eligible for the Pell Program, which, strangely enough, if you kick them out of the loan program, there's kind of a perverse incentive for abuse in the Pell side. So we believe that performance standards would protect all of the title IV programs.

So, in summary, we believe what you measure you get. We believe that, in gatekeeping, past statutory requirements have been sufficiently vague; that, 4 years later, we are still not where I believe you all want to be with respect to protecting the student and the taxpayer; and that it would appear to us that more bright-line legislative instruction is needed. Now, I'm not big on regulation and laws where it's not needed, but it does appear to us that it ought to seriously be considered by this subcommittee and the Congress as a whole.

Thank you.

[The prepared statement of Mr. Bloom follows:]

Mr. Chairman and Members of the Subcommittee:

We welcome this opportunity to discuss the gatekeeping process for schools that participate in the federal student financial assistance (SFA) programs under Title IV of the Higher Education Act (HEA). The issue of gatekeeping -- that is, the process for screening institutions to participate in the SFA programs -- has been one of great concern to the Office of Inspector General (OIG) for many years. We firmly believe that it is vital to the efficiency of the SFA programs to have strong front-end controls like effective gatekeeping, rather than to rely on back-end, institutional monitoring and enforcement mechanisms. In the Department's testimony today, these two efforts are described as a single process. While they both perform important functions, the gatekeeping process exists to prevent marginal schools from ever participating or continuing to participate in the SFA

programs.

The OIG has focused its work on non-degree-granting, vocational trade schools, because they have posed the greatest risk to the SFA programs in terms of fraud, waste and abuse. Therefore, my remarks will be directed to gatekeeping for those schools. Furthermore, based upon OIG's years of experience auditing and investigating the SFA programs, we believe that Congress should adopt a separate statutory and regulatory scheme for such schools, because they pose different challenges from the traditional academic schools for the administration of SFA programs. Indeed, the HEA already recognizes a distinction between degree

granting, higher education institutions and non-degree granting, vocational trade schools; only the latter are required to prepare students for "gainful employment in a recognized occupation."

I will urge in this testimony that reform of the gatekeeping process for the

SFA programs be guided by this principle: WHAT YOU MEASURE, YOU GET. It is vitally important that we measure the right things in order to ensure that

increasingly scarce taxpayer money is financing only quality training.

Unfortunately, the way the SFA programs currently are designed, there are virtually no enforceable, quantitative measures that assure the quality of vocational trade schools that may participate in the programs. The result is that students and taxpayers are not always getting their money's worth for the $8.8 billion spent annually on postsecondary vocational training.

Because the traditional gatekeeping mechanisms for the SFA programs have not assured the quality of the participating vocational trade schools, I will be advocating in this testimony that, with respect to the non-degree-granting, vocational trade school sector, Congress legislate consistent, measurable, objective standards which schools would have to meet in order to be eligible to participate in the SFA programs.