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Federal File: Watchdog's Report

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The Education Department's office of inspector general, an independent, 272-person unit that watches out for fraud, waste, and mismanagement among the department's programs and contractors, recently submitted to the Congress its seventh semi-annual report.

The unit's activities covered the period from April 1 to Sept. 30.


Under the leadership of Inspector General James B. Thomas Jr., who has held the nonpartisan position since 1980, the office processed 1,659 audit reports during the six-month period. These reviews resulted in the return of $14 million in misused funds to the Education Department.

The vast majority of those audits (1,230) were of higher-education institutions or programs. Only 16 audits were conducted of elementary- and secondary-school programs. Fourteen audits were conducted of Education Department programs, contractors, or grantees involved in educational research.

One audit of note: A review of interest and "special allowance" payments made by the Education Department to Guaranteed Student Loan lenders through its "manual" payment system disclosed that inadequate internal controls led to overpayments of more than $51 million in fiscal 1982.

The overpayments also resulted in "unnecessary" interest costs to the government of about $1.2 million.

In fiscal 1982, $1.6 billion of the $2.6 billion in the gsl program was processed manually; $1 billion was processed through an automated system.


The office opened 220 criminal investigations during the six-month period; about 90 percent of them involved the department's student financial-aid programs and allegations of individuals fraudulently receiving student aid.

The inspector general's investigations during that time resulted in 105 indictments and 54 convictions. Fines, restitutions, and settlements paid by those convicted amounted to $186,000, while the investigations saved the Education Department $388,000 in otherwise illegitimate payments, the report says.

In 1980, the inspector general's office established a "hotline" for complaints. Since then, it has received 544 "tips." Of the 448 that have been investigated, 90--about 20 percent--have been substantiated.

The hotline provided the office with 7 percent of the allegations that led to investigations by its staff members.


But the investigative office says it needs more money to do its job effectively.

In its report to the Congress, the office notes that it "continues to experience severe staffing and funding shortages," which impede its ability to do its job well enough. Its fiscal 1984 appropriation of $12.9 million will force the office to cut its full-time staff of 272 by 18, according to the semi-annual report.--tt

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