The Department of Education (Department) is required to use negotiated rulemaking to develop proposed regulations for programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA). Under negotiated rulemaking, the Department works to develop the proposed regulations in collaboration with representatives of the parties who will be significantly affected by the regulations. The proposed regulations are subsequently published in a document referred to as a Notice of Proposed Rulemaking (NPRM).
On May 26, 2009, the Department published a notice in the Federal Register announcing its intention to develop proposed regulations to maintain or improve program integrity in the Title IV HEA programs, including the topic of gainful employment (GE). GE was a requirement for eligibility in the Title IV programs for proprietary schools and certain postsecondary vocational schools, but had never been defined. The Department’s goals were to establish measures for determining whether programs lead to GE in recognized occupations and to institute conditions under which these educational programs could remain eligible to participate in student financial assistance programs authorized under the HEA. The proposed rules would seek to protect taxpayers against wasteful spending on educational programs of little or no value that also lead to high indebtedness for students.
On September 9, 2009, the Department published a notice in the Federal Register, which stated that defining GE in a recognized occupation would fall under the scope of the committee established to address program integrity issues (“Program Integrity Committee”). The Program Integrity Committee conducted three public negotiated rulemaking sessions beginning in November 2009, all of which included discussions on the topic of GE. By the final meeting in late January 2010, the negotiating committee had not reached agreement on each of the 14 program integrity issues, including GE. Because consensus was not achieved, the Department was under no obligation to adopt any of the draft language discussed in its development of the proposed regulations.
Over the next few months, Department officials worked on drafting the Program Integrity NPRM. In May 2010, the Department, in agreement with the Office of Management and Budget (OMB), split the Program Integrity NPRM into two separate NPRMs, with one to be devoted only to GE due to the complexity of the issue. On July 14, 2010, the Department sent the proposed GE regulations to OMB for formal review and comment. OMB cleared the proposed regulations the following day. At 8:45 am on July 23, 2010, the GE NPRM was posted for public inspection on the Federal Register website and published on July 26, 2010, in the Federal Register.
The initial objective of our audit was to determine whether the Department had a process for handling embargoed regulations and protocols related to the protection of sensitive information for Department staff involved in the negotiated rulemaking process. A few months into our fieldwork, we determined that in order to adequately address concerns being raised by members of Congress and public interest groups, we needed to significantly expand the scope of our audit work to include communications that took place between Department officials and outside parties. We subsequently revised our audit objective. The revised objective of our audit was to determine whether the Department appropriately handled sensitive information during the negotiated rulemaking process, specifically between the end of the public negotiated rulemaking sessions in January 2010 and the publication of the NPRM in July 2010.
In performing this audit, we obtained all email communications falling within the time period noted for 11 Department officials who were significantly involved in the development of the proposed GE regulations. We also obtained email communications falling within the same time period related to any Department employee that had either sent emails to or received emails from any of 14 individuals who were known to represent investment companies, student advocacy groups, and research firms. In addition, we obtained all email communications between Department employees and outside parties associated with any of nine email domains registered to investment companies, student advocacy groups, and research firms. A total of 357,095 emails were subsequently made available for review. We searched these emails using terms that were related to GE and the for-profit education industry to identify those for further review. We also reviewed documentation provided by the Department in response to related Freedom of Information Act requests and Congressional requests. In total, we reviewed over 69,602 pages of documentation,1 consisting primarily of emails,2 as part of our audit.
In addition to reviewing the emails and related documentation for any inappropriate disclosures of sensitive information, we further sorted and analyzed the emails and documentation to determine the types of entities that were communicating with Department employees, who was initiating the communications, and the purpose of the communications. We also examined hardcopy and electronic calendars maintained by the Department officials, to include related email communications, to identify scheduled meetings between Department officials and outside parties during this time period where the topic of discussion appeared to be related to GE. We further analyzed the identified meetings to determine the types of entities the Department officials were meeting with, who was requesting the meetings, and the number of times each entity type was met with. We also interviewed applicable Department officials to discuss the negotiated rulemaking process, the handling of sensitive information, and to follow-up on related emails and meetings as necessary.
Our audit found no improper disclosure of sensitive information by Department officials in their communications with outside parties, to include representatives from student advocacy groups, investment companies, for-profit colleges, media representatives, Congressional leaders and staff, or other Executive Branch agencies, between the end of the public negotiation rulemaking sessions and the publication of the GE NPRM.3 We also noted no concerns regarding Department activities, to include its communications strategy, preceding the release of the GE NPRM, and noted that, while the final metrics to be used were still subject to discussion, the Department’s position on GE was generally public knowledge via the public negotiated rulemaking sessions and information posted on the Department’s public website from the public sessions, to include draft regulatory language discussed during the final rulemaking session. We did note instances where outside parties informed the Department that they had received nonpublic information from individuals outside of the Department that had knowledge of the proposed regulations. In all instances, the source of the nonpublic information was identified as entities outside of the Department.
We noted some areas that the Department could improve upon with regard to the negotiated rulemaking process. Specifically, we determined that the Department lacked written protocols and transparency in the rulemaking process regarding communications with outside parties before the GE NPRM was published. Without protocols, current staff with little rulemaking experience or new staff is less likely to understand what types of communications are prohibited, discouraged, or acceptable. In addition, inconsistent procedures may be employed by staff involved in the rulemaking process. A lack of publicly available information regarding who the Department communicates with while drafting regulations may lead to diminished public trust in the Department’s decision-making process.
We also found that the Department did not require all Department employees who worked on the GE regulations to file a financial disclosure report. While we did not become aware of any conflicts of interest among the employees who did not file, failure to require employees who work on rulemakings with the potential to affect publicly traded entities to file the confidential disclosure forms could compromise the integrity of the rulemaking process.
During the course of our audit, we noted that a former high-level Department official that was significantly involved in the GE negotiated rulemaking process engaged in communications with his former employer, potentially in violation of applicable ethics standards. Our investigations office is reviewing this matter further.
To correct the weaknesses identified, we recommend that the Secretary ensure that the appropriate Department officials:
• Develop and implement a general written policy on the handling of private communications with outside parties during each phase of rulemaking proceedings and make the policy available to all Department employees.
• Consider publicly disclosing all relevant meetings with outside parties that occur after the public negotiated rulemaking sessions end and prior to the issuance of an NPRM, similar to the process followed for the disclosure of private meetings held following the public comment period, to increase transparency in the process.
• Require employees who work on rulemakings with the potential to affect publicly traded entities to file confidential financial disclosures.
In its response to the draft audit report, the Department concurred with Finding 1, stating that it took a number of steps to ensure that the rulemaking was a lawful, ethical process, and noting that it was gratified its careful handling of sensitive information was validated by OIG. The Department also noted its commitment to ensuring that all aspects of the negotiated rulemaking process are handled appropriately and that the process is as effective as possible. The Department stated that it will closely review the findings and recommendations in the final report and, where appropriate, incorporate them into future negotiated rulemakings under Title IV of the HEA.
Overall, we did not make any changes to our findings or recommendations based on the Department’s response to the draft audit report. We did make a minor technical correction in the Objective, Scope, and Methodology section of the report as suggested by the Department. The Department’s comments are summarized at the end of each finding. The full text of the response is included as Enclosure 2 to this report.