• Tuesday, February 14, 2012
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Federal Oversight of Lenders and Guarantors 'Needs Improvement,' Says Inspector General

Washington — Nearly three years after promising to improve its oversight over lenders and guarantors, the U.S. Department of Education has received another critical review from its inspector general.

In an audit report released today, the inspector general found that the department’s Office of Federal Student Aid, or FSA, still wasn’t doing enough to ensure that lenders, servicers, and guarantee agencies that participate in the guaranteed-student-loan program were complying with federal law.

The audit follows a 2006 review in which the inspector general accused FSA of valuing partnership over compliance, lacking adequate policies for reviewing lenders, failing to follow procedures in conducting reviews, and overstating the number of reviews it had performed.

The latest audit found lingering weaknesses in all five of the agency’s internal-control standards and criticized the department for taking too long to fix problems identified in the earlier report.

In a letter of response, James F. Manning, acting chief operating officer of FSA, said that the department had already taken steps to deal with the inspector general’s concerns, and planned to take additional measures “in the near future.” He also noted that the department had conducted its own assessments of its internal controls and “identified no material weaknesses related to monitoring and oversight.” —Kelly Field