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Senators Orrin Hatch and Tom Coburn have raised some concerns about a multimillion dollar anti-fraud command center opened up today.  Complete with a giant screen estimated to have cost hundreds of thousands, the center will house the HHS’ infamous $77 million dollar computer system which, as of last Christmas, had stopped one check for $7,591.  Peter Budetti, the Deputy Administrator of Program Integrity at the CMS(Centers for Medicare & Medicaid Services), a.k.a. the fraud czar, said that the center is expected to pay for itself many times over, repeating an old justification for a contract with Northrop Grumman that was also supposed to result in advances against fraud.  He actually had the “chutzpah” (this is a legal term of art) to say that the CMS could learn something from the private sector.  Perhaps when the private sector does business with itself there may be efficiencies, but, when the private sector does business with the public sector, the government gets robbed like an electronics store during a New York City blackout.  In any event, companies like Northrop Grumman are anything but private; take away the government contracts and their cash flow is about the same as a nine year old’s lemonade stand.  All this goes to show that Budetti may be better served by finding an honest nine year old – hopefully not one of Senator Hatch’s grandkids-for a government contract!

As Groucho Marx said, “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.”

The U.S. government provides $150 billion in loans per year to students participating in higher education programs.  This funding is only available to students attending accredited programs.  Despite the large amount of federal funding at stake, the Department of Education does not itself accredit educational programs.  Rather, the Department of Education relies on accrediting agencies, which are federally-approved private organizations, to assure taxpayers and students that federal financial aid is going to qualified institutions.

Programs seeking accreditation must go through a multi-step process where an accrediting agency evaluates the program to measure its performance against the agency’s own standards and those listed by the Department of Education.  After initial accreditation, programs must follow those standards to maintain accreditation.  False certifications by an educational institution to an accrediting agency, in order to become accredited and receive student funding, or to just maintain accreditation, can lead to Federal False Claims Act liability.  Interestingly, an accrediting agency’s operating funds come from fees paid by the entities they accredit.  This may pose a conflict of interest as accrediting agencies may be incentivized to compromise their standards to accredit as many programs as possible.  If an agency accredits organizations that do not meet certain standards, that agency may also be subject to False Claim Act liability.

Employees of for-profit colleges and online programs should be on alert for potential violations of the False Claims Act.  During the 2009-2010 school-year, for-profit programs received almost $32 billion in grants and loans provided to students under federal student aid programs.  The Government Accountability Office, the investigative arm of the U.S. Congress, has published reports in 2010 and 2011 illustrating various derelictions in the for-profit educational industry.  Investigators found that almost all programs instituted some suspect practices.

A common practice of for-profit schools is to pay recruiters for enrolling students.  The Higher Education Act prohibits schools participating in federal student aid programs from paying commissions, bonuses, or other incentive payments to individuals based on their success in enrolling students or securing financial aid for them.  Several for-profit institutions have also been known to encourage students to falsify their academic credentials to obtain federal funding.  These are just some of the many practices that may violate the Federal False Claims Act.

The federal government does not have the resources to police all college programs profiting from federal financial aid.  Accordingly, whistleblowers play an important role in protecting taxpayer dollars and ensuring that our students receive quality education.