- The Washington Times - Wednesday, February 15, 2012

The Department of Education has dispatched “mystery shoppers” posing as prospective students to various colleges and universities across the country — an anti-fraud initiative that came months after another agency dumped a similar plan amid criticism that it amounted to spying.

The undercover operation to root out student-aid fraud went unannounced by federal education officials, but spending records show it began last summer not long after the Department of Health and Human Services scrapped its own mystery shopper program.

Education Department officials declined to discuss the mystery shopping program, but an $18,300 task order paid out on a contract in September provides more detail about the hiring.

“The issuance of this task order will help the department identify misrepresentation and fraud … the department has instituted a mystery shopping program that will potentially expose deceptive practices and misrepresentations by higher education institutions,” the task order states.

The department awarded the contract in August to Second to None Inc. and Confero Inc. While contract records say it has a maximum value of $1 million, only a fraction of that amount has paid out with about $40,000 in task orders issued so far, according to spending records reviewed by The Washington Times. The documents don’t say which schools the mystery shoppers visited.

Mystery shopping represents a new form of oversight conducted by the Education Department, which had conducted program reviews and relied on tips from school employees and whistleblower lawsuits to uncover fraud.

In addition, the department has its own office of inspector general, an independent agency with a budget of more than $60 million that is tasked with uncovering fraud. Undercover techniques aren’t new to the inspector general’s office, either. In a 2007 investigation into federal student-aid fraud, the office used an undercover agent to buy a high school diploma.

Education Department officials, in the mystery shopper contract solicitation issued last summer, noted that “programmatic reviews are not necessarily well-suited to ferret out possible fraud or misrepresentation, and program reviewers cannot always look extensively behind a paper trail to discover improprieties.”

The contract records don’t specify whether for-profit colleges are being targeted. But the hiring also came around the same time that the Government Accountability Office (GAO) issued a sharply critical report based on surveys by undercover investigators posing as students who visited for-profit college financial-aid offices.

“Undercover tests at 15 for-profit colleges that found that 4 colleges encouraged fraudulent practices and that all 15 made deceptive or otherwise questionable statements to GAO’s undercover applicants,” the report concluded, adding that the results cannot be projected across the industry.

The highly publicized report, which sent stock prices at for-profit education companies tumbling, later underwent significant revisions that prompted criticism about the reliability of the GAO’s findings.

Steve Gunderson, a former Republican congressman and now chief executive of the Association of Private Sector Colleges, said in an interview Tuesday that the money spent on mystery shoppers could be put to better use.

“We are committed to making sure there’s no fraud or misrepresentation or abuse,” he said. “Think how much more effective [funds] could be used if the department sat down with us and jointly and proactively developed initiatives to educate and inform students in ways that would eliminate the abuse.”

Still, David Williams, president of the Taxpayers Protection Alliance, said, “Any sort of oversight is good for taxpayers, but the question is what comes of it.”

The Education Department isn’t the only federal agency to push for mystery shoppers. Officials at HHS spent more than $35,000 last year to purchase a database of health providers, one of the early steps in a process aimed at a mystery shopper program, spending records show. The initiative was announced in April but dropped by June amid criticism.

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